SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

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After seeing its unit price decline to S$0.785 on 23 March, NetLink NBN Trust has revisited its S$1.03 all-time high on 29 May. The Fibre Optic Business Trust listed in July 2017 with an IPO price of S$0.81 a unit.  
	 </li>
	<li>
NetLink reported 4QFY20 (to 31 Mar) revenue grew 5.2% YoY, with FY20 revenue up 4.7% YoY and FY20 DPU up 3.5% YoY at S$0.0505. For the March Quarter, NetLink reported stronger earnings than Singtel and StarHub. With a 12% total return, the Trust also outpaced the two companies in 2020 YTD.  Together the trio have averaged a 6% decline in 2020 YTD. 
	 </li>
	<li>
For the March quarter, both Singtel and StarHub reported lower revenues were impacted by weaker consumer spending following COVID-19. Both companies have also withdrawn guidance for coming quarters until more clarity emerges in the operating environment. 
	The three largest telecommunications service providers on SGX – Singtel, NetLink NBN Trust and StarHub averaged a decline in total return of 5.7% over the first five months of 2020, following there average total return of 13.0% in 2019. From 23 March through to 29 May, the trio averaged a 18.4% total return. M1 delisted in March 2019, after local conglomerate Keppel Corp and media company Singapore Press Holdings jointly bought out Malaysian telecoms provider Axiata Group’s 28.7% stake in M1. 
	 </li>
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Last month, Singtel and NetLink NBN Trust unveiled earnings for the fourth quarter ended 31 March 2020, while StarHub, which opted to report results on a half-yearly basis, provided a business update for the quarter. Singtel and NetLink Trust will move to half-yearly reporting from the start of their new financial year. Singtel 
Earnings Highlights 
For the quarter ended 31 March 2020, Singtel’s operating revenue fell 10% YoY to S$3.9 billion, hit by lower mobile service revenue and equipment sales and as well as the onset of COVID-19 in February. 
Underlying net profit decreased 15% to S$594 million, hit by pronounced weakness in its Australia business in the fourth quarter, due to continued data price competition and weak consumer sentiment. Net profit after tax declined 26% to S$574 million, following exceptional losses from a provision for Airtel’s regulatory demands on license fees and spectrum charges. Singtel’s regional associates continued to drive data usage growth, with pre-tax contributions rising 29% to S$500 million in the quarter. 
 

<table class="table table-striped"><tbody>
<tr>
<td>
			SINGTEL 
			</td>
			<td>
			4QFY20 (S$M)
			</td>
			<td>
			YoY Chg (%)
			</td>
			<td>
			FY20 (S$M)
			</td>
			<td>
			YoY Chg (%)
			</td>
		</tr>
<tr>
<td>
			Operating revenue
			</td>
			<td>
			3,899
			</td>
			<td>
			-10
			</td>
			<td>
			16,542
			</td>
			<td>
			-5
			</td>
		</tr>
<tr>
<td>
			Underlying net profit after tax
			</td>
			<td>
			594
			</td>
			<td>
			-15
			</td>
			<td>
			2,457
			</td>
			<td>
			-13
			</td>
		</tr>
<tr>
<td>
			Net profit after tax (NPAT)*
			</td>
			<td>
			574
			</td>
			<td>
			-26
			</td>
			<td>
			1,075
			</td>
			<td>
			-65
			</td>
		</tr>
</tbody></table>
*Includes exceptional losses from Airtel for provisions for regulatory demands after adverse Indian Supreme Court ruling

Source: Company data Outlook 
 

<ul>
<li>COVID-19 impact: 
	 </li>
	<li>Severe reduction in roaming; lower prepaid volumes; lower equipment sales and supply chain disruption</li>
	<li>Reduced enterprise and advertising spend</li>
	<li>Slower payments from customers</li>
	<li>Lockdown has accelerated unprecedented take-up rates for digital services by both consumers and enterprises trying to meet business demands 
	 </li>
	<li>Regional associates’ performance: 
	 </li>
	<li>Lockdowns introduced across their markets in March may impact upcoming results</li>
	<li>Investments in network and digital infrastructure are paying off as customers strive to stay connected during the pandemic</li>
	<li>Price war and consolidation in the Indian telecoms market over last two years has turned the corner; Airtel has gained share in a three-player market 
	 </li>
	<li>Positioning the business for longer term: 
	 </li>
	<li>Continue multi-year 5G capex programme to strengthen network and market leadership, so as to create new revenue opportunities</li>
	<li>Drive digital and enterprise growth with associates</li>
	<li>Scale digital ICT services and cybersecurity</li>
	<li>To provide FY21 financial outlook when there is greater clarity in the operating environment 
	 </li>
	<li>Group financial position remains healthy: 
	 </li>
	<li>Net debt stood at S$12.5 billion, including S$2.1 billion of lease liabilities recognised under new accounting standards</li>
	<li>Strengthened liquidity with S$4.2 billion raised through credit facilities in April</li>
	<li>FY20 free cash flow rose 4% to S$3.8 billion</li>
</ul>
 
Click <a href="https://links.sgx.com/FileOpen/4thqtr-NR-Singtel.ashx?App=Announcement&amp;FileID=612691">here</a> for the full results statement. 
 

NetLink NBN Trust 
 

Earnings Highlights 
 

For the quarter ended 31 March 2020, revenue gained 5.2% YoY to S$92.4 million, driven by higher residential connections and diversion revenue, but partially offset by lower installation-related revenue, as well as ducts and manholes service revenue. 
Earnings before interest, tax, depreciation and amortisation (EBITDA) declined 11.2% to S$55.8 million, following a one-time write-off of capitalised project cost from a discontinued IT system replacement project. For FY20, distributions per unit (DPU) rose 3.5% YoY to 5.05 Singapore cents. 
Driven by the stronger operating performance, NetLink’s net cash from operating activities rose to S$262.5 million in FY20, up from S$229.6 million in FY19. 
 

<table class="table table-striped"><tbody>
<tr>
<td>
			NETLINK NBN TRUST
			</td>
			<td>
			4QFY20 (S$M)
			</td>
			<td>
			YoY Chg (%)
			</td>
			<td>
			FY20 (S$M)
			</td>
			<td>
			YoY Chg (%)
			</td>
		</tr>
<tr>
<td>
			Revenue
			</td>
			<td>
			92.4
			</td>
			<td>
			5.2
			</td>
			<td>
			370.2
			</td>
			<td>
			4.7
			</td>
		</tr>
<tr>
<td>
			EBITDA
			</td>
			<td>
			55.8
			</td>
			<td>
			-11.2
			</td>
			<td>
			258.4
			</td>
			<td>
			4.3
			</td>
		</tr>
<tr>
<td>
			Profit after tax
			</td>
			<td>
			12.5
			</td>
			<td>
			-37.7
			</td>
			<td>
			78.1
			</td>
			<td>
			1.0
			</td>
		</tr>
<tr>
<td>
			Distribution Per Unit (SG cent)
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			5.05
			</td>
			<td>
			3.5
			</td>
		</tr>
</tbody></table>
Source: Company data Outlook 
 

<ul>
<li>Residential strategy: 
	 </li>
	<li>Connect households not on fibre via initiatives such as IMDA’s Home Access programme for low-income households</li>
	<li>Connect new homes 
	 </li>
</ul>
<ul>
<li>Non-Residential and Non-Building Address Points (NBAP) strategy: 
	 </li>
	<li>Prepare to support 5G infrastructure</li>
	<li>Customised offerings for SMEs</li>
	<li>Improve presence in major data centres</li>
	<li>Make NBAP easier and faster to deploy 
	 </li>
	<li>COVID-19 impact: 
	 </li>
	<li>Pandemic has presented some temporary operational issues for the Group</li>
	<li>The restriction on contractors’ foreign workforce, which included a mandatory Stay Home Order (SHO) on construction sector workers, has affected its capacity to fulfil service requests in late April and May 2020</li>
	<li>The temporary delays in fulfilling service requests are not expected to have material impact on revenue 
	 </li>
	<li>With its extensive nationwide fibre network, the Group is well-positioned to support Smart Nation initiatives, the Punggol Digital District and Jurong Innovation District</li>
	<li>Look forward to working with mobile network operators through use of its nationwide fibre network to accelerate the realisation of IMDA’s objectives to achieve pervasive deployment of 5G infrastructure</li>
</ul>
 
​​​​​​​Click <a href="https://links.sgx.com/FileOpen/NetLink_NBN_-_Press_Release_-_6_May_2020.ashx?App=Announcement&amp;FileID=609665">here</a> for the full results statement. 
 

StarHub 
 

Earnings Highlights 
For the quarter ended 31 March 2020, StarHub reported a 15.2% YoY fall in total revenue to S$506.2 million and a 25.7% decrease in attributable net profit to S$40.2 million. Service revenue declined 8.9% to S$404.9 million as a result of lower revenues from Mobile, Broadband and Pay TV. The Enterprise business recorded a 13.9% increase in revenue to S$152.8 million, led mainly by a 136.8% jump in Cybersecurity Services revenue to S$62.4 million. 
With border controls and movement restrictions, roaming, IDD and prepaid revenues have been significantly reduced. Its Enterprise business has also experienced some project and tender delays, coupled with longer sales cycles. However, its Cybersecurity business saw continued growth and reported a modest profit this quarter.

<table class="table table-striped"><tbody>
<tr>
<td>
			STARHUB
			</td>
			<td>
			1QFY20 (S$M)
			</td>
			<td>
			YoY Chg (%)
			</td>
		</tr>
<tr>
<td>
			Total revenue
			</td>
			<td>
			506.2
			</td>
			<td>
			-15.2
			</td>
		</tr>
<tr>
<td>
			Service revenue
			</td>
			<td>
			404.9
			</td>
			<td>
			-8.9
			</td>
		</tr>
<tr>
<td>
			EBITDA
			</td>
			<td>
			136.2
			</td>
			<td>
			-15.9
			</td>
		</tr>
<tr>
<td>
			Attributable net profit
			</td>
			<td>
			40.2
			</td>
			<td>
			-25.7
			</td>
		</tr>
</tbody></table>
Source: Company data Outlook 
 

<ul>
<li>COVID-19 impact:</li>
</ul>
<ul>
<li>The pandemic is expected to have a material impact on the Group’s revenue and profitability for the year, with varying degrees of revenue declines expected for most business segments</li>
	<li>The budgetary measures provided for by the Singapore Government have supported the maintenance of jobs, cash flow and mitigated some revenue impact 
	 </li>
	<li>Financial position: 
	 </li>
	<li>Successfully negotiated the refinancing of bank loans due for repayment this year, after which there will be no refinancing required until 2022</li>
	<li>It also has adequate credit facilities to manage its working capital and other funding requirements, with expectations to sustain positive operating cash flow generation this year</li>
	<li>Reviewing discretionary expenditure remains a priority 
	 </li>
	<li>In view of the uncertainty, it withdraws all guidance for 2020, and will update shareholders once there is greater visibility on COVID-19 impact 
	 </li>
	<li>5G strategy: 
	 </li>
	<li>Announced on 29 April 2020 that it has received the provisional 5G licence from IMDA</li>
	<li>Its strategic co-operation with M1 will allow both companies to optimise infrastructure and spectrum costs</li>
	<li>Intends to fast-track the rollout of 5G services – its two-pronged deployment includes the standalone architecture using the 3.5GHz spectrum, and non-standalone architecture utilising the 800MHz mmWave spectrum</li>
	<li>Regulator expects to award full licences by 1H2020</li>
	<li>More details on StarHub’s 5G services will be released closer to commercial readiness 
	 </li>
	<li>IT transformation: 
	 </li>
	<li>Optimise IT operations, lower costs and accelerate technology transformation</li>
	<li>Rationalise IT platforms and systems; deliver agile, new capability</li>
	<li>Cost savings built into three-year cost programme (cost savings of &gt;S$210 million identified) 
	 </li>
	<li>Strateq acquisition: 
	 </li>
	<li>Strateq is a leading end-to-end data driven IT solutions provider with growing international presence</li>
	<li>Asset light, complementary and scalable digital capabilities</li>
	<li>Growth and diversification opportunities in existing and new markets</li>
	<li>Acquisition expected to complete by 1H 2020 
	​​​​​​​</li>
</ul>
Click <a href="https://links.sgx.com/FileOpen/1Q2020MR.ashx?App=Announcement&amp;FileID=609619">here</a> for the full results statement.
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After seeing its unit price decline to S$0.785 on 23 March, NetLink NBN Trust has revisited its S$1.03 all-time high on 29 May. The Fibre Optic Business Trust listed in July 2017 with an IPO price of S$0.81 a unit.  
	 
	
NetLink reported 4QFY20 (to 31 Mar) revenue grew 5.2% YoY, with FY20 revenue up 4.7% YoY and FY20 DPU up 3.5% YoY at S$0.0505. For the March Quarter, NetLink reported stronger earnings than Singtel and StarHub. With a 12% total return, the Trust also outpaced the two companies in 2020 YTD.  Together the trio have averaged a 6% decline in 2020 YTD. 
	 
	
For the March quarter, both Singtel and StarHub reported lower revenues were impacted by weaker consumer spending following COVID-19. Both companies have also withdrawn guidance for coming quarters until more clarity emerges in the operating environment.  
	The three largest telecommunications service providers on SGX – Singtel, NetLink NBN Trust and StarHub averaged a decline in total return of 5.7% over the first five months of 2020, following there average total return of 13.0% in 2019. From 23 March through to 29 May, the trio averaged a 18.4% total return. M1 delisted in March 2019, after local conglomerate Keppel Corp and media company Singapore Press Holdings jointly bought out Malaysian telecoms provider Axiata Group’s 28.7% stake in M1. 
	 



      
    
    capture


Last month, Singtel and NetLink NBN Trust unveiled earnings for the fourth quarter ended 31 March 2020, while StarHub, which opted to report results on a half-yearly basis, provided a business update for the quarter. Singtel and NetLink Trust will move to half-yearly reporting from the start of their new financial year.   Singtel  
Earnings Highlights  
For the quarter ended 31 March 2020, Singtel’s operating revenue fell 10% YoY to S$3.9 billion, hit by lower mobile service revenue and equipment sales and as well as the onset of COVID-19 in February.  
Underlying net profit decreased 15% to S$594 million, hit by pronounced weakness in its Australia business in the fourth quarter, due to continued data price competition and weak consumer sentiment. Net profit after tax declined 26% to S$574 million, following exceptional losses from a provision for Airtel’s regulatory demands on license fees and spectrum charges. Singtel’s regional associates continued to drive data usage growth, with pre-tax contributions rising 29% to S$500 million in the quarter. 
 




			SINGTEL 
			
			
			4QFY20 (S$M)
			
			
			YoY Chg (%)
			
			
			FY20 (S$M)
			
			
			YoY Chg (%)
			
		


			Operating revenue
			
			
			3,899
			
			
			-10
			
			
			16,542
			
			
			-5
			
		


			Underlying net profit after tax
			
			
			594
			
			
			-15
			
			
			2,457
			
			
			-13
			
		


			Net profit after tax (NPAT)*
			
			
			574
			
			
			-26
			
			
			1,075
			
			
			-65
			
		

*Includes exceptional losses from Airtel for provisions for regulatory demands after adverse Indian Supreme Court ruling

Source: Company data  Outlook 
 


COVID-19 impact: 
	 
	Severe reduction in roaming; lower prepaid volumes; lower equipment sales and supply chain disruption
	Reduced enterprise and advertising spend
	Slower payments from customers
	Lockdown has accelerated unprecedented take-up rates for digital services by both consumers and enterprises trying to meet business demands  
	 
	Regional associates’ performance: 
	 
	Lockdowns introduced across their markets in March may impact upcoming results
	Investments in network and digital infrastructure are paying off as customers strive to stay connected during the pandemic
	Price war and consolidation in the Indian telecoms market over last two years has turned the corner; Airtel has gained share in a three-player market  
	 
	Positioning the business for longer term: 
	 
	Continue multi-year 5G capex programme to strengthen network and market leadership, so as to create new revenue opportunities
	Drive digital and enterprise growth with associates
	Scale digital ICT services and cybersecurity
	To provide FY21 financial outlook when there is greater clarity in the operating environment  
	 
	Group financial position remains healthy: 
	 
	Net debt stood at S$12.5 billion, including S$2.1 billion of lease liabilities recognised under new accounting standards
	Strengthened liquidity with S$4.2 billion raised through credit facilities in April
	FY20 free cash flow rose 4% to S$3.8 billion

  
Click here for the full results statement. 
 

NetLink NBN Trust 
 

Earnings Highlights 
 

For the quarter ended 31 March 2020, revenue gained 5.2% YoY to S$92.4 million, driven by higher residential connections and diversion revenue, but partially offset by lower installation-related revenue, as well as ducts and manholes service revenue.  
Earnings before interest, tax, depreciation and amortisation (EBITDA) declined 11.2% to S$55.8 million, following a one-time write-off of capitalised project cost from a discontinued IT system replacement project. For FY20, distributions per unit (DPU) rose 3.5% YoY to 5.05 Singapore cents.  
Driven by the stronger operating performance, NetLink’s net cash from operating activities rose to S$262.5 million in FY20, up from S$229.6 million in FY19. 
 




			NETLINK NBN TRUST
			
			
			4QFY20 (S$M)
			
			
			YoY Chg (%)
			
			
			FY20 (S$M)
			
			
			YoY Chg (%)
			
		


			Revenue
			
			
			92.4
			
			
			5.2
			
			
			370.2
			
			
			4.7
			
		


			EBITDA
			
			
			55.8
			
			
			-11.2
			
			
			258.4
			
			
			4.3
			
		


			Profit after tax
			
			
			12.5
			
			
			-37.7
			
			
			78.1
			
			
			1.0
			
		


			Distribution Per Unit (SG cent)
			
			
			 
			
			
			 
			
			
			5.05
			
			
			3.5
			
		

Source: Company data  Outlook 
 


Residential strategy: 
	 
	Connect households not on fibre via initiatives such as IMDA’s Home Access programme for low-income households
	Connect new homes 
	 


Non-Residential and Non-Building Address Points (NBAP) strategy: 
	 
	Prepare to support 5G infrastructure
	Customised offerings for SMEs
	Improve presence in major data centres
	Make NBAP easier and faster to deploy  
	 
	COVID-19 impact: 
	 
	Pandemic has presented some temporary operational issues for the Group
	The restriction on contractors’ foreign workforce, which included a mandatory Stay Home Order (SHO) on construction sector workers, has affected its capacity to fulfil service requests in late April and May 2020
	The temporary delays in fulfilling service requests are not expected to have material impact on revenue  
	 
	With its extensive nationwide fibre network, the Group is well-positioned to support Smart Nation initiatives, the Punggol Digital District and Jurong Innovation District
	Look forward to working with mobile network operators through use of its nationwide fibre network to accelerate the realisation of IMDA’s objectives to achieve pervasive deployment of 5G infrastructure

 
​​​​​​​Click here for the full results statement. 
 

StarHub 
 

Earnings Highlights  
For the quarter ended 31 March 2020, StarHub reported a 15.2% YoY fall in total revenue to S$506.2 million and a 25.7% decrease in attributable net profit to S$40.2 million. Service revenue declined 8.9% to S$404.9 million as a result of lower revenues from Mobile, Broadband and Pay TV. The Enterprise business recorded a 13.9% increase in revenue to S$152.8 million, led mainly by a 136.8% jump in Cybersecurity Services revenue to S$62.4 million.  
With border controls and movement restrictions, roaming, IDD and prepaid revenues have been significantly reduced. Its Enterprise business has also experienced some project and tender delays, coupled with longer sales cycles. However, its Cybersecurity business saw continued growth and reported a modest profit this quarter.




			STARHUB
			
			
			1QFY20 (S$M)
			
			
			YoY Chg (%)
			
		


			Total revenue
			
			
			506.2
			
			
			-15.2
			
		


			Service revenue
			
			
			404.9
			
			
			-8.9
			
		


			EBITDA
			
			
			136.2
			
			
			-15.9
			
		


			Attributable net profit
			
			
			40.2
			
			
			-25.7
			
		

Source: Company data  Outlook 
 


COVID-19 impact:


The pandemic is expected to have a material impact on the Group’s revenue and profitability for the year, with varying degrees of revenue declines expected for most business segments
	The budgetary measures provided for by the Singapore Government have supported the maintenance of jobs, cash flow and mitigated some revenue impact  
	 
	Financial position: 
	 
	Successfully negotiated the refinancing of bank loans due for repayment this year, after which there will be no refinancing required until 2022
	It also has adequate credit facilities to manage its working capital and other funding requirements, with expectations to sustain positive operating cash flow generation this year
	Reviewing discretionary expenditure remains a priority 
	 
	In view of the uncertainty, it withdraws all guidance for 2020, and will update shareholders once there is greater visibility on COVID-19 impact  
	 
	5G strategy: 
	 
	Announced on 29 April 2020 that it has received the provisional 5G licence from IMDA
	Its strategic co-operation with M1 will allow both companies to optimise infrastructure and spectrum costs
	Intends to fast-track the rollout of 5G services – its two-pronged deployment includes the standalone architecture using the 3.5GHz spectrum, and non-standalone architecture utilising the 800MHz mmWave spectrum
	Regulator expects to award full licences by 1H2020
	More details on StarHub’s 5G services will be released closer to commercial readiness  
	 
	IT transformation: 
	 
	Optimise IT operations, lower costs and accelerate technology transformation
	Rationalise IT platforms and systems; deliver agile, new capability
	Cost savings built into three-year cost programme (cost savings of &gt;S$210 million identified)  
	 
	Strateq acquisition: 
	 
	Strateq is a leading end-to-end data driven IT solutions provider with growing international presence
	Asset light, complementary and scalable digital capabilities
	Growth and diversification opportunities in existing and new markets
	Acquisition expected to complete by 1H 2020 
	​​​​​​​

Click here for the full results statement.



Singtel, NetLink & StarHub Unveil March Quarter Results

Malaysia

Axiata Group Berhad is a telecommunication company.  The Company's main activities is the establishment, maintenance, and provision of telecommunications and related services.

Axiata Group (AXIATA MK)

Singtel, NetLink & StarHub Unveil March Quarter Results

After seeing its unit price decline to S$0.785 on 23 March, NetLink NBN Trust has revisited its S$1.03 all-time high on 29 May. The Fibre Optic...

Singapore Exchange Ltd (SGX)