Singtel (SGX: Z74) has ramped up its capital recycling efforts in recent months.
The telco divested part of its Australian tower network late last year and is also said to be mulling a listing for its Australian subsidiary, Optus.
These moves have boosted the blue-chip group’s numbers as it reported its fiscal 2023 first quarter (1Q2023) business update for the period ended 30 June 2022.
Singtel’s share price has done well too, rising by close to 14% year to date.
Here are five highlights from the telco’s latest business update.
1. A higher underlying net profit
Group operating revenue dipped by 5.6% year on year to S$3.6 billion.
Underlying operating revenue, however, would have increased by 1.8% year on year if the migration revenue for Optus and contributions from Amobee were excluded.
For context, Amobee was sold off for US$239 million in fiscal 2022 and its results are no longer consolidated into the group-level financials.
Operating profit inched up 5.2% year on year to S$328 million.
Net profit soared 41.3% year on year to S$628 million backed by exceptional gains from the sale of Airtel and a dilution in Singtel’s stake in Australian Tower Network (ATN).
If these items had been excluded, underlying net profit would still be 10.7% higher year on year at S$499 million.
2. Singapore consumer division seeing a recovery
Out of Singtel’s business divisions, Singapore Consumer put up the best showing with a 3.4% year on year rise in operating revenue to S$428 million.
The division benefitted from an increase in the number of travellers as border controls eased.
Of note, mobile service revenue jumped 9.4% year on year on increased roaming and helped to offset declines in prepaid mobile and voice revenue.
Operating profit for Singapore Consumer climbed 23% year on year to S$91 million.
Meanwhile, the group’s Australian unit, Optus, saw revenue decline by 4% year on year while Singtel’s US-based Trustwave saw a more than halving of its revenue to S$44 million for 1Q2023..
Group Enterprise division, on the other hand, saw flat year on year revenue at S$613 million.
3. Bharti Airtel pulling up associates’ performance
Next up, Singtel’s regional associates.
Bharti Airtel’s stellar performance helped to offset the weakness in Singtel’s other associates.
The share of profit from Bharti, comprising India & South Asia and Africa, jumped more than five-fold year on year from S$16 million to S$86 million.
India and South Asia saw a sharp reversal, contributing S$52 million in profits compared to a S$13 million share of loss a year ago.
Africa saw an 18.5% year on year rise in profit contribution to S$34 million.
Elsewhere, Singtel’s Thai associates did not perform well, with AIS registering a 15.6% year on year decline in profits to S$59 million and Intouch seeing profit dip by 3.3% year on year.
4. Unlocking value for shareholders
Singtel has undertaken several initiatives to unlock value for shareholders as part of its strategic review announced last year.
Apart from the partial sale of ATN, Singtel also recently announced the sale of a 3.3% stake in Bharti Airtel that will raise S$2.25 billion.
The telco will also recognise an estimated net gain of S$600 million from this transaction.
Elsewhere, Singtel also divested its Comcentre site for S$1.6 billion and sold off Amobee.
As for Trustwave, the division is undergoing a review that may or may not materialise in a sale.
5. Dividends may grow over time
Singtel’s CFO, Arthur Lang, has hinted that the group’s dividends could rise in the future.
He reiterated that the monetisation of stakes in regional associates will help to increase Singtel’s return on invested capital and help to enhance total shareholder returns.
Inclusive of Bharti Airtel’s stake sale, the group would have raised over S$2 billion and put it in a strong position to grow dividends sustainably.
For FY2022, Singtel paid out a total of S$0.093, which was 24% higher than the S$0.075 paid out a year ago.
Singtel’s shares offer a trailing 12-month dividend yield of 3.5%.
Get Smart: More to look forward to
With higher roaming revenue and the number of tourists increasing in Singapore, Singtel should see higher contributions from its Singapore Consumer division in the months to come.
The telco also seems intent on realising more value for shareholders through the sale of stakes in its regional associates and fixed assets.
Investors can look forward to better times ahead and, hopefully, a higher interim dividend for 1H2023.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
