Moody's: SingTel's Financial Results Support its Current Debt Rating

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The debt ratings agency Moody's says that SingTel's latest financial results were in line with expectations and continue to support its Aa3 rating and stable outlook.

"Group revenues for Q3 FY2013/14 fell 7.3% to SGD4.3 billion due to lower revenue in Australia where competition remains intense, further exacerbated by the weaker Australian Dollar. SingTel reported healthy revenue growth of 3.7% for its Singapore business driven mainly by strong growth in mobile revenues," says Nidhi Dhruv, a Moody's Assistant Vice President and Analyst.

Despite falling revenues, SingTel's adjusted EBITDA (based on cash dividends from associates added back to EBITDA) for LTM December 2013 improved slightly to SGD6.8 billion from SGD6.5 billion for the fiscal year ended March 2013, leading to an appreciable improvement in EBITDA margins to 39.3%. The improvement in EBITDA is mainly attributable to tighter cost controls and higher dividends from Telkomsel and AIS.

"SingTel's share of post-tax earnings from its regional mobile associates increased 7.2% to SGD355 million for Q3 FY2013/14, reflecting strong performance across businesses particularly Bharti Airtel Limited (Baa3, stable). Bharti's contribution more than doubled to SGD57 million from SGD21 million in Q3 FY2012/13, although Bharti will not be a meaningful contributor of cash dividends in the near-term," adds Dhruv, also Lead Analyst for SingTel.

Post-tax earnings from Telekomunikasi Selular declined to SGD161 million from SGD185 million mainly on account of currency movements, as Indonesian Rupiah depreciated 18% YoY.

For LTM December 2013, the Group's adjusted EBITDA and adjusted debt remained relatively flat QoQ at SGD6.8 billion and SGD11 billion respectively. However, SingTel's adjusted net leverage declined to about 1.4x , a marginal improvement from 1.5x for LTM September 2013, on account of higher cash holdings.

Liquidity remains healthy for the rating level. SingTel's expected operating cash flow of SGD5.5-6.0 billion, based on Moody's forecast, as well as its cash holdings of SGD1.3 billion as of 31 December 2013, are sufficient to cover Moody's expectations of approximately SGD2.2-2.5 billion in capex and SGD2.5-2.8 billion in dividend payments for the next 12 months.

Net leverage will remain in the range of 1.4-1.5x in line with Moody's expectations for the rating. SingTel has also lowered capex guidance slightly to SGD2.2 billion from SGD2.5 billion on account of foreign exchange movements and delayed spending.

Moody's expects the company's solid financial metrics and liquidity profile to remain supportive of its a2 baseline credit assessment. SingTel's final rating of Aa3 incorporates a two-notch uplift for expected support from its major shareholder, Temasek Holdings.

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