Singtel H1 FY2024 Financial Analysis: Net Profit Decline of 42%

Business Description

Singapore Telecommunications Limited (Singtel) operates primarily in the telecommunications sector, offering mobile, fixed voice and data, pay television, content, and digital services. The company is structured into several business segments: Optus in Australia, Singtel Singapore, NCS, and Digital InfraCo. Singtel has a significant geographic footprint in Asia Pacific, with notable operations in Australia, Singapore, India, Indonesia, the Philippines, and Thailand.

Industry Position and Competitors

Singtel holds a strong position in the telecommunications industry, with substantial market shares in Singapore and Australia. Key competitors include Telstra in Australia, StarHub, and M1 in Singapore. Singtel’s market share in mobile customer base is 45.5% in Singapore and 30.7% in Australia [[4]].

Revenue Streams and Customer Base

Singtel’s revenue streams are diversified across mobile services, equipment sales, infocomm technology (ICT), data and internet services, fixed voice, and pay television. The company serves a wide customer base with 788 million mobile customers as at 30 September 2024, including contributions from regional associates [[55]].

Financial Statement Analysis

Income Statement

For the half year ended 30 September 2024, Singtel reported a stable operating revenue of S\$6,992 million, a slight decrease of 0.5% year-on-year. However, EBITDA increased by 9.0% to S\$1,947 million, driven mainly by Optus and NCS. The net profit, however, fell significantly by 42% to S\$1,232 million, mainly due to an exceptional S\$1.2 billion gain from Telkomsel’s equity dilution in the previous period [[4]] [[6]].

Balance Sheet

As of 30 September 2024, Singtel’s total assets stood at S\$45,161 million, with total liabilities of S\$20,567 million. Net assets were S\$24,594 million. The company’s financial position remains strong with a net debt gearing ratio of 28.3%, an increase from 23.8% in the previous year, primarily due to a A\$1.5 billion spectrum payment in Australia [[9]].

Cash Flow Statement

Net cash inflow from operating activities was S\$2,138 million, a decrease of 5.6% year-on-year, mainly due to the absence of a special dividend from Telkomsel. Free cash flow increased by 9.3% to S\$1,299 million, supported by improved operational performance and lower capital expenditure [[11]].

Dividend Information

The Board approved an interim ordinary dividend of 7.0 cents per share for the half year ended 30 September 2024, up 35% from the previous period. This includes a core dividend of 5.6 cents per share and a value realisation dividend of 1.4 cents per share, totaling S\$1.16 billion [[16]].

Key Findings and Recommendations

Strengths

• Strong market position in Singapore and Australia.
• Stable revenue streams with diversified services.
• Increased EBITDA and free cash flow indicating improved operational performance.
• Strong financial position with manageable debt levels.

Risks

• Significant decline in net profit due to absence of exceptional gains.
• Increased net debt gearing ratio due to spectrum payments.
• Potential impacts of currency fluctuations on earnings.

Investment Recommendations

For Current Investors: Hold. Despite the decline in net profit, the company’s strong market position, stable revenue streams, and improved operational performance justify maintaining the investment.

For Prospective Investors: Buy. The current decline in net profit appears to be a one-off event, and the company’s strong fundamentals and growth prospects in the telecommunications industry make it a worthwhile investment.

Report Date

This report analyzes the financial performance of Singtel for the half year ended 30 September 2024.

Special Activities

Singtel is focusing on cost optimization and business integration, which has led to reduced operating expenses and increased EBITDA. The company is also investing in advanced network capabilities and expanding its data center business [[7]] [[22]].

Disclaimer

This analysis is based on the financial report provided and is for informational purposes only. It is not intended as investment advice. Investors should conduct their own research before making any investment decisions.