Singapore: SingTel, Southeast Asia’s largest phone firm, posted a 3.7% drop in quarterly profit as weakness in Australia and Singapore offset buoyant emerging markets, sending its stock to a four-week low.
State-controlled Singapore Telecommunications proposed returning $2.2 billion in capital through a dividend of 20.5 Singapore cents a share, but the total shareholder payout was lower than 2006’s 4 billion Singaporean dollars.
SingTel shares fell 3.5%, while the benchmark Straits Times Index was off 0.27%. SingTel’s new chief executive Chua Sock Koong, 49, cooled investors’ 2008 profit expectations for its Singapore operations -- its main money spinner -- as the company steps up efforts to defend its fixed-line business and changes accounting of its operational earnings.
“The accounting change would mean the overall margin for the Singapore business is 43% (in 2007) and we are guiding them to 40%,” Chua told her first results briefing as CEO.
“There are a number of strategic initiatives that we are undertaking which will drive medium-term growth ... we would expect the payback to be in the next few financial years.”
Excluding these investments, 2008 operational earnings would be flat, she said.
Some analysts noted that while the 2007 dividends were higher than the 2-2.5 billion Singaporean dollars expected, the total payout was below 2006, when the company also announced a capital reduction.
“This (dividend) is significantly ahead of expectations,” Deutsche Bank analysts William Bratton and Matt Adams said, rating SingTel a “buy” with a 3.65 Singaporean dollar price target.
Citigroup analyst Anand Ramachandran, who also has a “buy” on the stock, said the dividend could have been higher.
SingTel, which owns Australia’s No.2 phone operator Optus and stakes in several Asian mobile firms, earned underlying net profit before goodwill and exceptionals of $641 million in January-March, down from 1 billion Singaporan dollars a year ago.
It attributed the drop to a tax charge, excluding which earnings grew 13%.
Fourth-quarter attributable profit fell 41% to 989 million Singaporean dollars -- beating market expectations of 904 million Singaporean dollars-- reflecting the absence of 618 million Singaporean dollars in one-off gains booked last year after creditors took over its loss-making submarine cable unit C2C Pte. Ltd.
SingTel said it hopes to achieve double-digit underlying earnings growth over the medium term.
Battling heavy competition and a mobile phone penetration rate of 100 percent in its limited home market of 4.5 million people, SingTel has spent about 20 billion Singaporean dollars in recent years buying firms in high-growth Asian countries and in Australia.
SingTel owns 21.5% of Thailand’s Advanced Info Service, 30.8% of India’s Bharti Group, 44.6% of Globe Telecom in the Philippines, 35% of Indonesia’s PT Telkomsel and 45% of Pacific Bangladesh Telecom.
The businesses accounted for 43% of underlying net profit in January-March, up from 35% last year.