Besides a clearly laid down dividend policy, which will give shareholders a higher FY2025 payout of 17 cents versus 15 cents paid last year, Singtel is also buying back $2 billion worth of shares over three years, as part of the broader bid to improve returns.
Proceeds from these moves come mainly from a systemic unlocking of the value of latent assets that Singtel owns, ranging from its listed mobile associates to its company headquarters building.
By doing so, Singtel is turning back the hefty holding company discount the market has previously applied.
Another reason for the analysts' optimism is that Singtel has reported operational improvements across most of its units and associates.
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Hussaini Saifee of Maybank Securities has trimmed his FY2026 and FY2027 earnings estimates to take into account lower earnings from associates in Thailand and India.
However, with the capital management plans, he believes that Singtel deserves a higher valuation.
"Singtel’s holding company discount at 25-30% should narrow in light of improved operational performance, tight execution and clear and higher capital return initiatives," says Saifee, who has raised his target price to $4.30 from $3.96.
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For context, Saifee points out that back in 2020, when Singtel cut its dividends, the holding company discount widened to as much as 40%.
"We stay positive on its outlook with improving ROIC, capital management upside, and operational execution as rerating catalysts," says RHB Bank Singapore, which now rates this counter $4.50, up from $3.80.
For Sachin Mittal of DBS Group Research, Singtel might redeploy capital freed up to accelerate core EBIT growth.
"Consolidation among smaller telecom players in Singapore is also possible," says Mittal, who has raised his target price to $4.40 from $4.27.
UOB Kay Hian's Chong Lee Len and Llelleythan Tan Yi Rong have similarly raised their target price from $3.58 to $4.58. Besides the higher dividend, the $2 billion share buyback came as a "surprise".
"Singtel remains an attractive play against elevated market volatility, underpinned by improving business fundamentals and a decent 4.7% dividend yield for FY2026," state Chong and Tan.
In contrast, Prem Jearajasingam of CGS International has kept his "hold" call and $4 target price.
He calls the higher asset monetisation target of $9 billion a "positive surprise" but believes that at current valuation of 22.5x FY2026 earnings, upside potential is capped, even as capital recycling efforts are tracking ahead.
Singtel shares changed hands at $3.90 as at 9.34 am, down 1.27%.
