“The misconduct period is historical, and any reputational impact has likely already been reflected in Optus’s current market positioning,” says Saifee, who remains optimistic on Singtel’s growth outlook, underpinned by three key drivers: a narrowing holding company discount to 20%–25% from 25%–30%, accelerating data centre expansion in Singapore and Thailand, and further Optus improvements.
Prem Jearajasingam of CGS International has maintained his “hold” call but with a slightly raised target price of $4.10, up from $4. Further upside for Singtel is capped by its earnings-based valuation, while the yield of 5% is a support against further downside, states the analyst in his June 17 note. He figures that Singtel, underpinned by its asset monetisation programme, can continue to support yields of more than 5% up to FY2028. Singtel is boosting shareholders’ returns via a $2 billion share buyback programme.
Jearajasingam says this extra boost to returns will not be indefinite. He acknowledges that Singtel can pay out more dividends via its value realisation dividend, derived from the balance of the sale of assets after capex. “We concur with management that there needs to be a sustainable trajectory to dividends to avoid a sharp fall in dividends (and share price) when the value realisation dividends end,” he adds.
In his view, Singtel will see a cap on further upside to its share price, which is now trading at 21.6 times FY2026 earnings, more than one standard deviation above its post-2009 trading range — unless there is further “sizeable” asset sale, such as additional selling of its stake in Bharti, its associate in India. A likely monetisation target is Singtel’s 7.7% stake in Thailand’s Gulf Development, worth $2.3 billion or 14 cents per share, says Jearajasingam.
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DBS Group Research’s Sachin Mittal sees growing value from organic growth in Singtel’s core businesses. Over the next 12 months, he expects Singtel’s core value to grow by 180% with its data centre business, NCS and Australian subsidiary, Optus, expected to drive a core business net profit CAGR of 10% over FY2025 to FY2028. The higher core net profit is underpinned by a projected core ebit growth of 9% over FY2025 to FY2028, supported by a 5% growth in Singapore’s ebit as well as a 15% growth in Optus’ ebit from FY2025 to FY2028.
“Optus and NCS are already contributing to core ebit growth, while the data centre business is expected to see a significant rise in its contribution from FY2027 onwards,” writes Mittal in his June 19 note, where he kept his “buy” call.
As such, he sees a “strong case” for Singtel to post a 300% increase in core business value, driven by a re-rating from 5 times to 18.5 times its 12-month forward P/E. “Positive surprises could come from the ramp-up of data-centre, GPU as a service and potential consolidation in Singapore,” Mittal, who has raised his target price to $4.58 from $4.40 previously, as he expects the market to reward the telco for improving its core business.
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In his view, positive catalysts could stem from Singtel’s higher investment in its core business and a potential consolidation in Singapore. The telco may redeploy capital to accelerate its core ebit growth through data centres and graphics processor units as a service. Consolidation among the smaller telco players in Singapore is also a possibility, notes Mittal.
On his target price, Mittal says: “With a revised divestment target of $9 billion (previously $6 billion) over the next three years, we narrow the holding company discount to 10% (previously 15%) and value its associate at $3.66 per share (previously $3.50), using market prices for all except Telkomsel, which is valued at a fair value.”
Mittal’s new valuation metrics, which changed from EV/ebitda to a forward 12-month P/E ratio of 18.5 times, due to improving visibility of core earnings growth from Singapore and Australia, result in a core value of 93 cents per share from 90 cents. “Singtel’s share price of $3.99 suggests a core value of only 33 cents per share, suggesting just a 6.6 times P/E ratio for the core business.”
Further to his report, Mittal notes that Singtel’s associate value has increased by 62% from 2017, yet the stock is still trading flat due to Singtel’s Singapore and Australian businesses’ value is down by 80%. A decline in the Australian dollar or “irrational competition” in Australia could hinder recovery, he adds.
