HSBC Global Research analysts have kept their “buy” call on Singapore Telecommunications (Singtel) but with a slightly raised target price of $3.70 from $3.65 previously.
According to their report dated Jan 20, Singapore’s telco consolidation is not a matter of “if” but “when”, due to intense price competition and low returns for smaller operators.
Given Singtel’s market leading position, the analysts are optimistic that it will be able to maintain stable ebitda in the coming FY2026 ending March 2026 and FY2027.
“In a scenario in which Singapore ARPU is 5% higher than our forecasts in FY2026, then we estimate Singtel ebitda and net profit could be higher than our base case by 1% and 2% respectively for FY2026,” the analysts say.
They also expect an upbeat dividend outlook due to rising underlying core earnings and a potentially higher value realisation dividend (VRD) which Singtel will pay from proceeds of asset monetisation moves. “We forecast DPS to rise by 6.7% y-o-y in FY2025 to 16 cents, and 6.1% y-o-y in FY2026 to 17 cents,” note the analysts.
Singtel’s ebitda is projected to grow at a 5% CAGR, reaching $4.1 billion by FY2027. This will be driven by cost optimisation initiatives across Singapore and Australia, rising mobile revenue at Optus and growth at NCS and its data centre unit.
The analysts expect NCS margins to expand, while Singapore’s data centre capacity is set to double to 120MW by 2026.
Meanwhile, Optus’s ARPU started to improve with tariff hikes in 1HFY25, with the full impact expected to be reflected during 2HFY2025.
The analysts expect Optus to grow its ebitda between FY2024 and FY2027 at a CAGR of 5%, led by ARPU improvement and cost optimisation initiatives.
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In a scenario in which “industry discipline” is maintained and Optus ARPU is 5% higher HSBC’s forecasts in FY2026, they figure that Singtel’s overall ebitda and earnings can both be 4% than their FY2026 base case.
As at 11.21 am, shares in Singtel are trading 2 cents lower or 0.64% down at $3.11
