MRE has maintained it’s outperform on the stock with a 35% potential upside over the next 12 months.

Can Telecommunications be Sexy with Large Returns?

In an ever changing and competitive telecommunications market there are still significant profits to made by market leaders. As the dust settles on the sudden fight for market share Singtel (SGT) the owner of Optus Telecommunications appears to be leading the charge. This was reinforced yesterday after SGT reported strong full year results that fell in line with Macquarie Research Equities (MRE) expectations. With a reported profit up over 10.5% and all divisions performing the company looks to be winning this fight for market control.

There were no real surprises in the result, with the market now seemingly focused on the FY09 year. Management has reiterated conservative guidance although has made allowances for changes to their structure and protocol going forward. Evidence for this is seen in MRE’s prediction of slower growth, though they do expect it to be above 6%. Bharti will be the key driver for the business with Singapore remaining steady. Optus, SGT’s Australian division, is expected to grow around 5% driven by its relatively small fixed line business. Africa and the Middle East appear tempting and are likely targets for company expansion over 2009, yet the company did state it will be a slow and disciplined approach to this development.

MRE has maintained it’s outperform on the stock with a 35% potential upside over the next 12 months. Despite the overall picture looking bright, MRE still believe the operating environment remains challenging with their Bharti operation being the main driver for growth. This is particularly pertinent with that division currently in negotiations to take over rival MTN.