Singtel Financial Analysis: Net Profit Decline of 42.1%

Business Description

Singapore Telecommunications Limited (Singtel) operates in several business segments including Optus (Australia), Singtel Singapore, NCS, and Digital InfraCo. The company provides mobile, fixed voice and data, pay television, content and digital services, ICT, and equipment sales across its various segments. Singtel has a significant presence in Singapore and Australia, which respectively account for approximately 45% and 51% of the consolidated revenue for the half year ended 30 September 2024.

Industry Position and Market Share

Singtel is a leading telecommunications company in Asia-Pacific with substantial investments in regional associates like Airtel (India and Africa), AIS (Thailand), Globe (Philippines), and Telkomsel (Indonesia). The company faces competition from other regional telecom giants but maintains a competitive edge through its diversified services and significant market presence.

Revenue Streams and Customer Base

Singtel’s revenue streams include mobile service, equipment sales, Infocomm Technology (ICT), data and internet services, fixed voice, and pay television. The company serves a broad customer base including individual consumers, enterprises, and government bodies.

Financial Statement Analysis

Income Statement

The Group reported a net profit after tax of S\$1,238.4 million for the half year ended 30 September 2024, a decline from S\$2,140.6 million in the previous year [[2]]. This represents a net profit decline of approximately 42.1%. The significant drop is primarily due to lower exceptional gains and a reduction in operating revenue.

Balance Sheet

The Group’s total assets stood at S\$45,160.9 million as of 30 September 2024, down from S\$46,198.5 million as of 31 March 2024 [[4]]. The decline in assets is attributed to a reduction in current assets, particularly cash and cash equivalents. Total liabilities decreased slightly to S\$20,566.5 million from S\$21,233.8 million during the same period.

Cash Flow Statement

Net cash from operating activities was S\$2,138.1 million, a decrease from S\$2,265.3 million in the previous year [[10]]. Net cash used in investing activities was S\$2,194.7 million, primarily due to significant investments in property, plant, and equipment. Net cash used in financing activities was S\$1,935.7 million, with major outflows for dividend payments and repayment of borrowings.

Dividends

The Directors approved an interim one-tier tax exempt ordinary dividend of 7.0 cents per share, totaling approximately S\$1.16 billion for the current financial year ending 31 March 2025 [[22]]. This includes a core dividend of 5.6 cents per share and a value realisation dividend of 1.4 cents per share.

Key Findings

Strengths

• Diversified revenue streams across multiple business segments.
• Strong market presence in Singapore and Australia.
• Significant investments in regional telecom associates.

Risks

• Decline in net profit by 42.1% year-over-year.
• Significant outflows in investing activities impacting cash reserves.
• Regulatory and legal challenges in key markets like Australia and India.

Special Activities

During the half year ended 30 September 2024, Singtel committed up to RM 564 million (S\$175 million) in capital for its joint venture in Malaysia and entered into a 10-year electricity purchase agreement with Sembcorp Power Pte Ltd [[20]].

Recommendations

For Current Stockholders

Given the decline in net profit and significant investment outflows, it may be prudent to hold the stock if you have a long-term investment horizon. The approved interim dividend provides some immediate return.

For Potential Investors

Considering the current financial performance and market challenges, it may be wise to wait for a more favorable financial outlook before investing in Singtel. Monitor upcoming financial reports for signs of recovery.

Disclaimer

This analysis is based on the interim financial report provided and is for informational purposes only. It is not a recommendation to buy or sell any securities. Investors should conduct their own research or consult a financial advisor before making investment decisions.