“An extension of its value realisation programme, improved Bharti performance, Optus and its regional data centre businesses lead us to raise FY2026–FY2028 estimates,” writes Jearajasingam in his Sept 2 note.
Along with its FY2024 results in May 2024, Singtel introduced the ST28 $6 billion medium-term asset recycling programme, where a key feature is to pay a value realisation dividend (VRD) of between 3 cents and 6 cents per share using proceeds from its asset monetisation after taking off capex needs.
At its most recent FY2025 results, Singtel raised this asset recycling target to $9 billion. Jearajasingam believes that this is a target that Singtel can easily achieve, specifically by steadily reducing its stake in Bharti Airtel, which has a market capitalisation of around $160 billion.
Matching Mittal
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As Singtel has often articulated, it intends to match its stake with that of Sunil Mittal, the promoter of this telco. Following the most recent sale of 1.2% in Airtel in May, worth $2 billion, Singtel holds a 28.3% stake. Assuming the Mittal family sell their remaining direct stake in Bharti Airtel, its stake would be reduced from 22.3% to 19.9%.
If Singtel further lowers its stake to this same level, that is another 8.4% to divest, Singtel could net a further $13 billion just from this exercise, according to Jearajasingam. “Our understanding is that Singtel will do this progressively rather than do a one-off transaction. This is to ensure there is no buildup of capital leading to an erosion of shareholder returns,” says Jearajasingam, adding that Singtel is not likely to make sizeable acquisitions which might then require speedier selling of its Bharti Airtel shares.
Jearajasingam believes that Singtel has the capacity to deliver higher returns to shareholders through several channels. First, the VRD component is now guided within a range of 3 to 6 cents per share. Singtel can increase the upper limit and thereby pay more than 6 cents per share in the initial years. When the underlying operations return more profit, Singtel can then lower the VRD component but continue to pay the dividends out of earnings from its operations.
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Next, when VRD is stopped, perhaps after FY2023, Singtel can then increase the payout ratio of its regular dividend to the upper end of the 70% to 90% guide. For FY2024, its payout ratio for this component was 82%.
Singtel can also speed up the buyback of shares and increase the allocation for share buybacks. As announced together with its FY2025 results, it has an ongoing programme to buy back up to $2 billion worth of shares, which at current prices is around 2.8% of the company. Every extra $1 billion in share buybacks means another 1.4% in shares that can be repurchased and help lift EPS and DPS, says Jearajasingam.
Meanwhile, Singtel is likely to enjoy healthy demand for regional data centre capacity, with more than 200MW of gross regional data centre capacity onstream by 2026, with a medium-term pipeline of more than 400MW. Via a partnership with the conglomerate Hitachi, SingTel is also looking to expand its footprint to Japan.
Over at Optus, market repair is taking place in Australia, thereby lifting average revenue per user (ARPU) and Optus earnings, which were up 33% y-o-y in the most recent 1QFY2026 ended June.
“We see further sales of its stake in Bharti, higher for longer VRD payments and further newsflow around improving earnings out of its core operations, spurring a re-rating of its shares, which currently trade at 22 times FY2027 earnings,” says Jearajasingam, whose new revalued net asset value-derived target price of $4.80, from $4.10 previously, is at 22 times its 2027 P/E. “A 4.6% FY2026 dividend yield provides added support, in our view,” he adds.
A team of analysts at HSBC Global Investment Research has maintained its “buy” call, along with a higher target price of $4.75, up from $4.45 previously, after the telco impressed them with its ability to grow core earnings, dividends, and provide more value to shareholders.
This current FY2026, Singtel is set to enjoy ebit growth from Optus, its Australian unit, and NCS, its regional enterprise services unit. For the coming FY2027, growth is seen from the doubling of data centre capacity in Singapore.
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All in, Singtel’s underlying profit is set to grow at a CAGR of 10% between FY2025 and FY2028, with contributions too from its core business and stronger contributions from its network of regional associates, according to HSBC analysts Piyush Choudhary, Rishabh Dhancholia and Abhishek Jhanwar in their Sept 1 note.
Dividend watch
With the growing earnings, HSBC believes Singtel will pay 18 cents in dividends for FY2026 and 19 cents for FY2027, compared to the 15 cents paid for FY2025. Singtel has an eye on spending more effectively, too. It is tapping artificial intelligence to put in place a new cost savings programme, which will be announced by the end of FY2026.
Paul Chew of PhillipCapital, similarly, has raised his target price. From an earlier estimate of $4.40, he now values Singtel at $4.86, given the improving industry dynamics, with mobile price repair gaining traction in key markets such as India, Thailand, and Australia. “Except for Singapore and Indonesia, most countries have a clear line of sight for mobile price repair,” he writes in a Sept 1 note.
Mobile prices in India are expected to rise over the next three to four years. Bharti Airtel can also increase its ARPU organically as users switch to smartphones, move to postpaid plans, roam more, and incur excess data charges, adding approximately INR5 ($0.073) to INR8 annually. Stronger cash flow and lower capital intensity should support higher dividends for Bharti.
In Thailand, mobile prices have been stable in the past year after the removal of unlimited data plans. AIS reported blended ARPU increased 3.9% y-o-y in 2QFY2025, while 5G adoption and its planned virtual bank are expected to drive further growth.
In Australia, Optus has benefited from industry-wide price hikes, including at its Mobile Virtual Network Operator unit, amaysim. A new management team, flat operating expenses despite high inflation, and efforts to modernise its systems are expected to lift Optus’s margins, with room for ebitda to expand from 27% towards peers’ mid-30% range.
Chew notes that mobile prices in the Philippines appear to be bottoming. Globe Telecom continues to face pressure from incumbents but has seen its fintech arm Myint (or GCash) grow into a key earnings contributor, contributing to 26% of net income before tax in 2QFY2025.
In Indonesia, Telkomsel’s efforts to raise prices remain fragile amid weaker consumer sentiment, though broadband demand is a bright spot. In Singapore, downward pressure persists, but there are “fingers-crossed expectations” following the planned consolidation of Simba and M1, notes Chew.
Chew also cites stronger earnings visibility from Singtel’s data centre business, Nxera, which is set to double capacity and ebitda. Its GPU-as-a-Service will launch in 2HFY2025, following a year of fine-tuning, catering to sovereign and government demand. Contracts will typically run three to five years, with graphics processing units (GPUs) largely underwritten by customers or redeployed at expiry, targeting mid-teens or higher returns.
According to Singtel, Nxera will prioritise Singapore clients, with Johor and Batam serving as spillover zones, and is entering Tokyo to capture strong GPU demand. “We increased our EV/Ebitda multiple for Singtel from seven times to eight times, in line with peers as operations improve in Australia and data-centre earnings accelerate. Value realisation (or medium-term special) dividends are likely to remain at the higher end of expectations at around 6 cents with the larger pipeline of assets to monetise,” writes Chew.
Hussaini Saifee of Maybank Securities, meanwhile, raised his target price from $4.30 to $4.75 in his Sept 3 report, after factoring in higher assumptions for Optus, Singapore mobile, and the digital infraco. The impending acquisition of M1’s mobile business by Simba will result in slightly higher mobile earnings for Singtel in Singapore, following rationalisation post-consolidation. “Singapore is undergoing an intense phase of telco competition, but we expect competitive rationality to return, in line with trends observed in regional and global markets.”
