SingTel (Z74) 's Performance vs Telkomsel's Performance

4 August 2023

Following Citi's comment on the softness in net profit from Telkomsel would affect SingTel's profit,  SingTel came out to clarify that Telkomsel’s 21 percent year-on-year decline in net profit as reported was caused by fair value revaluation of its investment in consumer Internet company GoTo.   Such revaluation will not affect Singtel’s net profit or underlying net profit. 

It was reported that Telkomsel’s net income for the second quarter ended Jun 30 fell to 5.41 trillion rupiah (S$476.2 million) from 6.82 trillion rupiah.

Technical Analysis

The false news about SingTel's falling profit had caused a candlestick gap (Not adjusted see note) with about 5.5 million trading volume on 2 August.    

The volume is about 3 times the 100-day average,  The gap can be considered to be a normal gap with high trading volume that might take only weeks to cover the gap.  This is because a runaway gap that would take months to cover would normally have a trading volume of more than 4 times the average.  

As the gap is caused by false news,  we expect the gap to be filled in a much shorter time than it used to be.

Note:  The closing price of SingTel on 1 August was S$2.64.  After adjusting for the dividends,  it should be read as  S$2.56.

3 August 2023

SingTel’s price dropped from S$ 2.64 on 1 August to close at S$ 2.46 on 2 August, a drop of about  6.8%.    This is because

a)   It was an Ex-Dividend day for SingTel.   There were altogether 2 Dividend payouts,  one for S$ 0.025 and the other for S$ 0.053.  The total dividend was S$0.078.

b)   Citi has flagged softness from Telkomsel,  its regional associate in Indonesia.

 

SingTel’s Shares in Telkomsel

Telkomsel is owned by Telkom.  Indonesia and SingTel.  Presently, SingTel has a share of 30.5% in Telkomsel under its subsidiary,  Singapore Telecom Mobile.

 

How Telkomsel’s performance will affect SingTel?

According to the 2022 annual report,  Telkomsel has a table showing the following profit and loss for the last 5 years.   

 

We can see that Telkomsel’s net income has slid from Rup 26,160 billion (S$  2.3 billion) in 2021 to Rup 18,367 (S$ 1.6 billion) in 2022.  This is about a 30% drop or a drop of Rup 7.800 billion (S$ 690 million).   

However,  the EBITDA has increased slightly.   As the revenue increase with lower Net Income,  it would suggest that the competition for Telkomsel was quite keen in 2022.  As EBITDA is still growing,  the long-term performance for Telkomsel appears to be on track for better performance in the future.

As the loss of income in Telkomsel will reflect as a loss in SingTel’s revenue,  we expect SingTel’s revenue loss for 2022 as compared to 2021 was only S$210 million (S$690 x 30%).

As SingTel’s revenue for 2022/23 was S$14.62 billion,  this S$210 million loss in revenue was only 1.4% (210/14,620) of SingTel revenue for 2022/23.

 

SingTel’s FY 2023 performance

SingTel,  in its FY 2023 presentation in May 2023 said,

1)   Full-year net profit was up 14% to S$2.23 billion;

2)   Regional associates’ pre-tax contributions up by 10% to S$2.27 billion;

3)   EBITDA and EBIT increased by 3% and 8% respectively;

It would appear SingTel’s earning has not been affected at all by the lower net income of 1.4% from Telkomsel.  

For information,  Telkomsel’s FY 2022 result was reported in December 2022 and SingTel's FY 2023 was reported in May 2023.

Given the above,  we do not expect Telkomsel’s performances will have much impact on SingTel’s performance going ahead.

 

Disclaimer:  This article is for information and educational purposes.   Readers are advised to conduct their own research and study to make their own investment decisions.

Other Articles about SingTel

Technical Analysis for SingTel on 26 July 2023