Company Reports

We retain our fair value estimate for narrow-moat Singtel at SGD 2.40 following the release of a third-quarter result that was broadly in line with our expectations. The stock looks fairly valued at these levels, and we suspect the company will need to show consistent earnings growth from its core operations before it will get a positive rerating. On an underlying basis, meaning constant currency and excluding the now-sold Trustwave, each third-quarter revenue, EBITDA, and operating profit were broadly flat year on year, meaning they deviated by less than one percent. Slight earnings growth from Optus and NCS was offset by earnings declines from Singtel’s domestic business.

Singtel is the incumbent telecommunications company in Singapore and has expanded into emerging markets in the Asia-Pacific region and India. Singtel’s solid free cash flow is supported by its market-leading position in Singapore and as the second-largest service provider in Australia. Emerging-markets investments hold significant presence in their respective markets and deliver cash flow through dividends to the group. Along with consistent dividend streams from its investments, we expect Singtel to deliver moderate growth in profits and free cash flow despite strong competition in its core Australian and Singapore markets. Most excess cash generated from its core telecom businesses and investments will likely be paid back to shareholders through dividends with the company committing to a 70%-90% dividend payout ratio.

We reduced our fair value estimate for Singapore Telecommunications, or SingTel, to SGD 2.40 from SGD 2.52, following the release of a first-half result where revenue was slightly lower than our expectations, but net profit was above. More important, we factor in some negative impact on Optus following the outage on Nov. 8, which is the main driver of our downgraded fair value estimate. The stock looks fairly valued at these levels. SingTel’s first-half, fiscal 2024 operating revenue declined 3% year on year, with EBITDA down 5% year on year and underlying net profit up 12%. Assuming constant currencies, SingTel’s first-half revenue would have been up 2%, EBITDA down 1%, and net profit up 16%. Notably, this strong underlying net profit growth was mainly on the back of reductions in depreciation and net interest expense. Net interest expense fell because of an improved balance sheet following asset divestitures.

Singtel is the incumbent telecommunications company in Singapore and has expanded into emerging markets in the Asia-Pacific region and India. Singtel’s solid free cash flow is supported by its market-leading position in Singapore and as the second-largest service provider in Australia. Emerging-markets investments hold significant presence in their respective markets and deliver cash flow through dividends to the group. Along with consistent dividend streams from its investments, we expect Singtel to deliver moderate growth in profits and free cash flow despite strong competition in its core Australian and Singapore markets. Most excess cash generated from its core telecom businesses and investments will likely be paid back to shareholders through dividends with the company committing to a 70%-90% dividend payout ratio.

We maintain our fair value estimate for narrow-moat Singtel at SGD 2.52 following the release of first-quarter results. Revenue was slightly lower than our expectations, but profits were above them. SingTel’s first-quarter fiscal 2024 operating revenue declined 2.7% year on year with EBITDA down 7.7% year on year. Assuming constant currencies, revenue would have been up 2.5% and EBITDA down 3.1%. Note, underlying net profit rose 19.9% mainly on the back of significant reductions in depreciation and net interest expense. Our fair value estimate implies a price/earnings ratio for Singtel of 19 times, which is slightly ahead of its average over the past 10 years. On our valuation, the associate businesses are worth around 80% of the total value of Singtel with the remainder from Singtel’s consolidated Singapore and Australian businesses. Our forecasts assume a fiscal 2024 dividend of 10.1 cents per share, which would imply around 4% dividend yield.

We decrease our fair value estimate for narrow-moat Singtel to SGD 2.52 from SGD 2.62 previously following the release of a broadly in-line fiscal 2023 (year-ended March 2023) result. The decrease was mainly due to currency and associate share price updates. Singtel’s fiscal 2023 operating revenue declined 4.7% year on year with EBITDA down 2.2% year on year and EBIT before associates' contributions up 6.4%. Associates' contributions, up 7.1% year on year, drove underlying net profit up 6.8%. Assuming constant currencies, revenue would be down 1.7%, EBITDA was up 1%, and net profit was up 11.2%. We retain our narrow moat rating for Singtel. Our fair value estimate implies a price/earnings ratio of 19 times for Singtel, which is slightly ahead of its average over the past 10 years. On our valuation, the associate businesses are worth around 80% of the total value of Singtel with the remainder from Singtel’s consolidated Singapore and Australia businesses. Our forecasts assume a fiscal 2024 dividend of 10.1 cents per share, which would imply around a 4% dividend yield.

Singtel is the incumbent telecommunications company in Singapore and has expanded into emerging markets in the Asia-Pacific region and India. Singtel’s solid free cash flow is supported by its market-leading position in Singapore and as the second-largest service provider in Australia. Emerging-markets investments hold significant presence in their respective markets and deliver cash flow through dividends to the group. Along with consistent dividend streams from its investments, we expect Singtel to deliver moderate growth in profits and free cash flow despite strong competition in its core Australian and Singapore markets. Most excess cash generated from its core telecom businesses and investments will likely be paid back to shareholders through dividends with the company committing to a 60%-80% dividend payout ratio.

Although we are broadly maintaining our earnings forecasts following the release of in line third-quarter fiscal 2023 (quarter-ending December 2022) results, we decrease our fair value estimate for narrow-moat Singtel to SGD 2.62 from SGD 2.72 previously, due to the currency updates and lower associate share prices.

Singapore Telecommunications is the incumbent telecommunications company in Singapore and has expanded into emerging markets in the Asia-Pacific region and India. Singtel’s solid free cash flow is supported by its market-leading position in Singapore and as the second-largest service provider in Australia. Emerging-markets investments hold significant presence in their respective markets and deliver cash flow through dividends to the group. Along with consistent dividend streams from its investments, we expect Singtel to deliver moderate growth in profits and free cash flow despite strong competition in its core Australian and Singapore markets. Most excess cash generated from its core telecom businesses and investments will likely be paid back to shareholders through dividends with the company committing to a 60%-80% dividend payout ratio.

We decrease our fair value estimate for narrow-moat Singtel to SGD 2.72 per share from SGD 2.80 following the release of a broadly in-line result for the fiscal 2023 second quarter, ended September. The decrease was mainly due to currency and associate share price updates, particularly the 6% fall in the Australian dollar/Singapore dollar exchange rate since our previous update. First-half operating revenue declined 5.1% year on year with EBITDA down 2.6% year on year and EBIT before associate contributions up 1.2%. Associate contributions up 10.5% year on year and SGD 165 million of exceptional gains related to asset sales and exceptional items from associates drove reported net profit up 25% with underlying reported profit up 4.9%. Interestingly, the company made its first large write-down of goodwill in Optus of SGD 1.004 billion although this seemed mainly driven by currency movements and a weakened economic outlook rather than any change in the fundamental view on Optus. We retain our narrow moat rating for Singtel. Our fair value estimate implies a price/earnings ratio of 22 times, slightly ahead of the average over the past 10 years. In our valuation, the associate businesses are worth around 80% of the total value of Singtel with the remainder from Singtel’s consolidated Singaporean and Australian businesses.

Singapore Telecommunications is the incumbent telecommunications company in Singapore and has expanded into emerging markets in the Asia-Pacific region and India. Singtel’s solid free cash flow is supported by its market-leading position in Singapore and as the second-largest service provider in Australia. Emerging-markets investments hold significant presence in their respective markets and deliver cash flow through dividends to the group. Along with consistent dividend streams from its investments, we expect Singtel to deliver moderate growth in profits and free cash flow despite competition increasing in its core Australian and Singapore markets. Most excess cash generated from its core telecom businesses and investments will likely be paid back to shareholders through dividends with the company committing to a 60%-80% dividend payout ratio.

We increase our fair value estimate for narrow-moat Singtel to SGD 2.80 from SGD 2.70 previously, following the release of a broadly in-line first-quarter fiscal 2023 result (quarter ending June 2022). The increase was mainly due to currency and associate share price updates. Fiscal first-quarter operating revenue and EBITDA declined by 5.6% and 2.0%, respectively. In constant currency terms, excluding NBN migration revenue and contributions from Amobee, fiscal first-quarter revenue increased 4.1%, with EBITDA up 5.4%. We retain our narrow moat rating for the company. Our fair value implies a price/earnings ratio for Singtel of 22 times, which is slightly ahead of its average over the past 10 years. On our valuation, the associate businesses are worth around 75% of the total value of Singtel, with the remainder from Singtel’s consolidated Singapore and Australian businesses.

Singapore Telecommunications, or Singtel, is the incumbent telecommunications company in Singapore and has expanded into emerging markets in the Asia-Pacific region and India. Singtel’s solid free cash flow is supported by its market-leading position in Singapore and as the second-largest service provider in Australia. Emerging-markets investments hold significant presence in their respective markets and deliver cash flow through dividends to the group. Along with consistent dividend streams from its investments, we expect Singtel to deliver moderate growth in profits and free cash flow despite competition increasing in its core Australian and Singapore markets. Most excess cash generated from its core telecom businesses and investments will likely be paid back to shareholders through dividends with the company committing to a 60%-80% dividend payout ratio.

We decrease our fair value estimate for narrow-moat Singapore Telecommunications, or Singtel, to SGD 2.70 from SGD 2.74 previously following the release of a broadly in line fiscal-year 2022 result (fiscal year ending March 2022). The reduction was mainly due to currency and associate share price updates. Fiscal 2022 operating revenue and EBITDA declined by 1.9% and 1.7%, respectively. In constant currency terms, excluding NBN migration revenue and Jobs Support Scheme, or JSS, credits, second-half operating revenue declined 4.5% with EBITDA increasing 1.9%, driven by mobile price increases in Australia in May 2021. We retain our narrow moat rating for the company and believe the stock is broadly fairly valued. Our fair value implies a price/earnings ratio for Singtel of 21 times, which is slightly ahead of its average over the past 10 years. On our valuation, the associate businesses are worth around 75% of the total value of Singtel with the remainder from Singtel’s consolidated Singapore and Australian businesses. To a certain extent, the stock remains a dividend play. The company paid a SGD 0.093 dividend in fiscal 2022, implying a dividend payout ratio of 80%. The company has committed to paying somewhere in the range of 60%-80% of fiscal 2023 underlying earnings as a dividend, and we forecast the dividend per share to lift to SGD 0.102 cents in fiscal 2023 and to increase to SGD 0.149 cents by fiscal 2027, assuming an 80% dividend payout ratio.

Singapore Telecommunications, or Singtel, is the incumbent telecommunications company in Singapore and has expanded into emerging markets in the Asia-Pacific region and India. Singtel’s solid free cash flow is supported by its market-leading position in Singapore and as the second-largest service provider in Australia. Emerging-markets investments hold significant presence in their respective markets and deliver cash flow through dividends to the group. Along with consistent dividend streams from its investments, we expect Singtel to deliver moderate growth in profits and free cash flow despite competition increasing in its core Australian and Singapore markets. Most excess cash generated from its core telecom businesses and investments will likely be paid back to shareholders through dividends with the company committing to a 60%-80% dividend payout ratio.

Singapore Telecommunications, or Singtel, is the incumbent telecommunications company in Singapore and has expanded into emerging markets in the Asia-Pacific region and India. Singtel’s solid free cash flow is supported by its market-leading position in Singapore and as the second-largest service provider in Australia. Emerging-markets investments hold significant presence in their respective markets and deliver cash flow through dividends to the group. Along with consistent dividend streams from its investments, we expect Singtel to deliver moderate growth in profits and free cash flow despite competition increasing in its core Australian and Singapore markets.

We increase our fair value estimate for narrow-moat Singtel to SGD 2.74 from SGD 2.70 previously following the release of an in-line third-quarter fiscal 2022 result (quarter ending December 2021) update. This was mainly due to currency and associate share price updates rather than any changes to assumptions for the core businesses in Australia and Singapore.

We lift our fair value estimate for narrow-moat Singapore Telecommunications to SGD 2.70 per share from SGD 2.42 per share following the release of a slightly better-than-expected first-half fiscal 2022 result (half-year ending September 2021) update, with the uplift driven mainly by the net increase in share prices for listed associates since the previous update. First-half reported revenue was up 3.1% with operating profit (excluding associate contributions) declining 3.9%. Normalizing for a range of factors including currency, NBN migration revenue in Australia, and Jobs Support Scheme credits in Singapore, revenue was up 2.6% with operating profit up 69%. Improved profitability from the associates, in particular Airtel, and the Australian Consumer business (ex- NBN migration) were the main reasons for the profit increase. We retain our narrow moat rating for the firm and believe the stock is broadly fairly valued. Our fair value implies a price/earnings ratio for Singtel of 18 times, slightly ahead of its average over the past 10 years. On our valuation, the associate businesses are worth around 70% of Singtel's total value with the remainder from Singtel’s consolidated Singapore and Australian businesses. To a certain extent the stock remains a dividend play. With the firm committed to paying somewhere in the upper half of the range of 60%-80% of fiscal 2022 underlying earnings as a dividend, we forecast the dividend per share to lift to SGD 8.8 cents in fiscal 2022 and to increase to SGD 11.6 cents by fiscal 2026.

Singapore Telecommunications, or Singtel, is the incumbent telecommunications company in Singapore and has expanded into emerging markets in the Asia-Pacific region and India. Singtel’s solid free cash flow is supported by its market-leading position in Singapore and as the second-largest service provider in Australia. Emerging-markets investments hold significant presence in their respective markets and deliver cash flow through dividends to the group. Along with consistent dividend streams from its investments, we expect Singtel to deliver moderate growth in profits and free cash flow despite competition increasing in its core Australian and Singapore markets.

Singtel announced the sale of 70% of its wholly owned Australian tower assets business, Australia Tower Network, and the planned investment in growing a regional data centre business. We make no changes to our SGD 2.42 fair value estimate and retain our narrow moat rating but would recommend investors wait for a better price to buy. Our fair value estimate implies a price/earnings ratio of 18 times, which is slightly ahead of its average over the past 10 years. On our valuation, the associate businesses are worth around 70% of the total value of Singtel with the remainder from Singtel’s consolidated Singapore and Australian businesses. To a certain extent, the stock remains a dividend play. We forecast the dividend per share to lift to SGD 9.4 cents in fiscal 2022 and SGD 12 cents by fiscal 2026.