• 9M22 revenue/EBITDA met expectations at 76%/72% of our FY22e estimates. Underlying PAT of S$473mn was flat YoY.
• Mobile earnings expanded in Singapore, Australia and India. The Philippines was the key drag. Rising ARPU and cost controls were the key drivers of earnings growth.
• Enterprise earning was sluggish from legacy services and lower project wins.
• We kept our FY22e forecast largely unchanged before incorporating S$261mn net gain from disposal of Australia Tower Network. As roaming revenue returns, economic conditions improve and competition is more benign, we expect mobile to enjoy earnings growth in FY22e and FY23e. We maintain our ACCUMULATE recommendation and SOTP TP of S$2.86.

The Positive

+ Improving mobile ARPU and earnings. Blended ARPU for mobile is recovering in Singapore (+4.3% YoY), Australia (+4.8%) and India (+12%). ARPUs are rising on the back of more benign competition, improving roaming revenue, higher priced data plans and the 5G roll-out. Mobile earnings rose from operating leverage and better cost controls.

The Negative

– Lacklustre enterprise. Despite the growth engines of cloud and cybersecurity, enterprise revenue is bogged down by legacy telco services and higher headcount expenses. The lack of new projects was another source of weakness.

Outlook

A general recovery in emerging market economies is a tailwind for Singtel’s associate earnings. Demand for mobile services in these countries is more a discretionary spend with a higher propensity to rise as income levels improve. Australia and Singapore will ride on the rebound in roaming and incremental uplift in ARPU from 5G.

Maintain ACCUMULATE with an unchanged TP of S$2.86

Our SOTP valuation is based on 6x EV/EBITDA for Singtel’s core Singapore and Australia businesses and associates marked to market with a 20% discount to reflect volatility in their share prices.