Singtel falls up to 3% after $2.3 bln impairment

Shares of Singapore Telecommunications (Singtel) Z74 fell as much as 3.3% on Monday to a more than one-week low after it forecast non-cash impairment provisions of S$3.1 billion ($2.28 billion) for the second half of 2024.

The impairment provisions would lead to the telecom giant reporting a net loss for the second-half period and a lower net profit for the full-year ended March 31, 2024, according to Singtel.

Shares of Singtel were down 2.5% during Monday midday at S$2.35 per share, underperforming the broader benchmark stock index's STI 0.2% decline.

"Singtel highlighted that this won't impact its dividend which is based on 70% to 90% of the underlying net income while the non-cash impairment charges will be booked as one offs," Maybank Research analyst Hussaini Saifee wrote in a research note on Monday.

Maybank Research MAYBANK reiterated its buy rating on Singtel with an unchanged price target of S$3.05.

"Singtel is on track to pay at the upper end of its dividend policy for the financial year ended 31 March 2024," the Singapore-based telecom firm said.

About S$2 billion of the total impairment provision originates from its mobile network operation unit, Optus' goodwill, Singtel, Southeast Asia's largest telecom operator, said in its filing.

An "impending deal" for Optus was recently ruled out by Singtel following reports that talks for a potential stake divestment had fallen off.

Singtel added that Optus expects a non-cash impairment provisions of S$470 million on its enterprise fixed access network assets, mainly due to weaker prospects, increased cost of capital and a bleak macroeconomic outlook.

After conducting a strategic review of its enterprise business, Optus found that it was reporting steep declines in fixed carriage revenue, in-line with an overall market decline in Australia, the Singtel filing stated.

Among other units, the Asia Pacific cyber security business is expected to report non-cash impairment provision for goodwill of S$340 million, with S$280 million of the same expected from IT service provider NCS Australia.

The company is scheduled to report results for the financial year ended March 31 on May 23.

In a separate announcement on Monday, Singtel said Optus has struck a deal with local rival TPG Telecom TPG to provide access to its local radio network in regional Australia.

($1 = 1.3616 Singapore dollars)