Mittal expects the HoldCo discount to narrow to 10% to 15%, supported by projected core operating profit growth of 17% in FY2025 and 6% in FY2026, led by stronger performance at Optus and enterprise unit NCS.
Potential catalysts include increased investment in core businesses and possible consolidation among telecom players in Singapore.
“Our higher target price reflects a three-month roll forward of our core valuation and a narrower target HoldCo discount of 15% from 20% previously,” he wrote in a note dated May 19.
Geographical diversification continues to underpin Singtel’s earnings, with over 67% of FY2024 group operating profit came from regional associates in India, Indonesia, the Philippines, and Thailand.
See also: Singtel's target prices raised as 'capital return in high gear'
Last week, Singtel announced that it has sold 1.2% of its direct stake in India’s Bharti Airtel for $2 billion as part of its ongoing capital recycling strategy.
“The idea is to reinvest in its core business in Singapore and Australia. This could include new growth areas such as data centres, GPU-as-a-service, and ICT opportunities. Core operating growth has shown a very high correlation with Singtel’s stock price, and could help to narrow the holding company discount, which is still over 25%, to the 10% to 15% range,” says Mittal.
Following the transaction, Singtel will hold 28.3% stake in Airtel, valued at about $48 billion. Mittal sees potential for Singtel to divest another 5% over the next three to five years, aligning its stake with Airtel’s key promoter and unlocking an estimated $8 billion to $10 billion in potential proceeds.
As at 11am, shares in Singtel are trading 2 cents higher or up 0.53% at $3.81.
