Analysts at UOB Kay Hian (UOBKH) are maintaining their “buy” call on Singapore Telecommunications (Singtel) with the target price of $3.58.
Singtel has improved its ROIC from 8.3% in FY24 to around 9%, and is expected to continue its upward momentum towards its medium-term goal of low double-digit percentage in three years’ time.
The growth will be underpinned by improved profitability from its core businesses (in Singapore and Optus), its ongoing cost-out programme, better contributions from its regional associates and strong revenue growth from NCS and Nxera (an infrastructure company), according to the analysts.
Singtel’s value-unlocking initiatives have also remained on track. This includes $6 billion of capital recycling in the medium term, the $1 billion in non-core fixed assets and $3 billion in assets from Thailand to monetise.
“Furthermore, the group would gain roughly $1 billion in cash in FY26 from the redevelopment of the Singtel Comcentre,” note UOBKH’s analysts. “We estimate that the group now has $12 billion to $13 billion in monetisable assets that could be returned to shareholders.”
The analysts anticipate Singtel will deliver higher value-realisation dividends (VRD) in the coming years. “We opine that the group could likely pay 6 cents/share or even surpass its guidance [of 3 to 6 cents/share] sustainably for the next three to five years. For FY25, we now expect a total dividend (including VRD) of 16.5 cents/share, implying a dividend yield of around 5.2%.”
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Despite stiff competition from SIM-only plans in Singapore, Singtel’s 3QFY25 revenue is forecasted to grow around 2% y-o-y. This will be largely driven by increased contributions from Optus due to price increases in the quarter.
Underlying net profit for 3QFY25 is expected to grow by 9% to 10% y-o-y, supported by stronger profitability at Optus, increased contributions from regional associates, and improved margins across the group’s growth engines.
As at 11.15 am, shares in Singtel are trading 1 cent lower or 0.32% down at $3.14.
