Noting that the incidents indicate heightened near-term financial risks, Maybank Securities’ analyst Hussaini Saifee lowers his target price to $4.62 from $4.75 previously. He flags the potential for customer churn and weaker pricing power, higher operating expenditure and capital expenditure (capex) to boost redundancy, and additional provisions.
“Although the full impact remains uncertain, a conservative scenario assumes a 5% decline in Optus mobile revenue for FY2027, no margin growth until FY2028, a 2–3 percentage point increase in capex intensity, and A$200 million ($170 million) in provisions. Under these assumptions, Singtel Group’s FY2028 earnings and sum-of-the-parts (SOTP) valuation could decrease by 5–6%,” writes Saifee in a Sept 30 note.
Meanwhile, RHB Bank Singapore struck a more upbeat tone, maintaining its target price of $4.90. It notes that Optus had invested more than A$9.3 billion in its network over the past five years, dismissing talk of underinvestment.
“Optus’ transformation involves closing the pricing differential with Telstra and successive ebitda improvments, amongst others. It is too early to conclude if the latest incidents will derail the good postpaid price repair momentum seen over the recent quarters. The latest price-ups took effect in late-July, and is yet to be reflected in Optus’ numbers,” writes RHB.
Regulatory penalties remain a risk. Optus was fined A$12 million for the 2023 outage and took A$142 million in provisions for the 2022 data breach. Guidance on new provisions is expected with first-half results.
Despite near-term headwinds, analysts point to structural support for Singtel’s stock. The group has launched a $2 billion buyback, offers a forecast dividend yield of about 5% in FY2026, and benefits from associates such as Bharti Airtel, Telkomsel and AIS. Expansion in data centres and AI services via its Nxera unit also underpins growth.
Singtel shares have fallen about 7% since the Sept 18 outage, compared with an 11% slump after the 2022 breach. “The selldown represents a good buying opportunity – in our view – with Singtel’s longer-term underlying thesis of return on invested capital (ROIC) improvement, capital management upsides, and ebit growth still intact,” writes RHB.
As at 10.48 am, shares in Singtel are trading 3 cents lower, or 0.73% down, at $4.09.
