SINGAPORE (Thomson Financial) - Singapore Telecommunications Ltd, Southeast Asia's biggest telecom company, said Tuesday its fiscal first-quarter net profit rose a faster-than-expected 10.4 percent from a year earlier but the results failed to impress investors, with the stock trading flat most of the day.
SingTel said net profit for the three months ended June rose to 927 million Singapore dollars from 840 million a year earlier, supported by strong contributions from regional mobile associates. Analysts polled by Thomson Financial had expected profit of 856-877 million dollars.
SingTel said its share of pretax profit from associates in India, Indonesia and the Philippines rose 32 percent to 652 million dollars for the quarter.
Operating revenue increased 11 percent to 3.57 billion dollars, supported by robust growth in Singapore and a steady business in Australia.
Analysts said they were suprised that the Singapore business grew at a double-digit rate but such an improvement, driven mainly by growth in mobile and broadband services, is not enough to drive SingTel's share price higher.
CIMB-GK Research analyst Khoo Chen Hsung said the improvement in the Singapore business is a positive change but is not enough to boost Singtel's share price because growth is still coming from the regional associates, particularly Bharti in India and Telkomsel in Indonesia.
'It's positive but not significant enough to act as a catalyst,' Khoo, who rates SingTel 'neutral' with a target price of 3.74 dollars, said.
Khoo said he prefers StarHub over SingTel because the former offers stronger growth prospects and better dividend yields.
StarHub's net profit in the three months to June grew a mere 6.8 percent year-on-year to 80.80 million dollars but growth is expected to accelerate. It paid a quarterly dividend of four cents and is promising to pay a minimum annual dividend of 15.5 cents this year.
'The payout from SingTel will not be as generous as StarHub,' Khoo said, adding that SingTel's plans to acquire other mobile phone companies in Asia would crimp SingTel's ability to pay more dividends.
Citigroup is more positive on SingTel, recommending the stock as a 'buy' with a target price of 3.90 Singapore dollars.
'We expect the solid results to drive some much needed cheer to the stock,' the brokerage said in a note to clients.
Citigroup expects SingTel's recurring net profit to rise from 3.52 billion Singapore dollars in the year to March 2007 to 3.55 billion dollars in the year to March 2008, to 4 billion in fiscal 2009 and 4.55 billion in 2010.
At 4.30 pm, SingTel was flat at 3.50 dollars, with 20 million shares traded. It has traded between 3.48 and 3.54 dollars so far.
StarHub was up 10 cents at 3.06 dollars with 2.43 million shares traded.
(1 US dollar = 1.52 Singapore dollars)
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