SingTel faces "flattish" earnings for FY13: Barclays

But will fare better in succeeding years.

Here's more from Barclays:

We raise our 12-month, sum-of-parts driven price target to S$3.65 from S$3.50 primarily to incorporate our recently increased price target of Rs393 for Bharti. We tweak our estimates to reflect the results for 3Q FY13 – there is minimal change to operational numbers.

We now expect a flattish earnings profile for SingTel for FY13, but then we see solid 12% three-year earnings CAGR thereafter. A 70% payout on our estimates would deliver a yield of 4.5% for FY13, rising to 5.8% in two years on our projections for earnings growth. Potential asset monetization points to a potential special dividend in FY14E – a positive catalyst, if delivered. We stay Overweight on the stock.

We stay OW on three counts: 1) A flattish FY13 earnings profile sets SingTel up for a 12% three-year CAGR thereafter, on our estimates; 2) 70% payout on our estimates means 4.5% yield off FY13E earnings, growing to 5.8% in two years as earnings grow; and 3) we see AssetCo monetization efforts becoming more visible into 2013 – definitive progress should then start to drive special dividend expectations.

Key takeaways from 3Q FY13 analyst briefing: 1) Management maintaining focus on profitable market share growth in Singapore vs. market share alone; 2) tiered data plans seeing good take-up in Singapore and modest upside to ARPU if these trends sustain, but it is too early for specific LTE trends in Australia; (3) reaffirm undertaking to reduce NetLink Trust stake to less than 25% by April 2014 – valuation and market conditions indicated as crucial drivers; (4) Tower sales at Telkomsel – compliance to local regulations and operational and financial optimization for Telkomsel indicated as primary drivers in any discussion.

3Q recurring profit was S$874mn (-2.3% y/y): This was modestly below our estimate of S$894mn and the Bloomberg consensus of S$904mn. 3Q FY13 operational EBITDA of S$1.26bn (+0.5% y/y) was in line with our estimate of S$1.28bn. The lower depreciation expenses and taxes offset a lower associates' contribution to leave recurring profit slightly lower.