However, this number may see a significant leap as Singtel has confirmed that a consortium comprising KKR & Co and itself is in discussions to acquire ST Telemedia’s Global Data Centres (STT GDC) in a deal valued at approximately $5 billion.
STT GDC is one of Asia’s largest data centre operators, with more than 95 sites across 11 markets and points of presence in over 20 major business markets. It currently has a total capacity of 1.7GW of IT load.
The possible deal follows the consortium’s $1.75 billion investment last year for a minority stake in STT GDC. Following that transaction, KKR holds approximately 14.1% of the company, while Singtel owns 4.2%.
Group CEO Yuen Kuan Moon says that nothing is finalised or definitive, and will make an announcement when appropriate. “Nxera is expected to maintain a 20% ebitda CAGR to FY2029, as new capacities come online, while RE:AI is expanding to meet strong sovereign AI demand. We are also open to accelerate DC growth through inorganic means, should opportunities arise [within the region],” he adds, referring to the company’s AI cloud computing service.
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“We acknowledge that this is a very capital-intensive industry… that is why we believe in having capital partners,” adds Lang, citing KKR as its capital partner in the acquisition of the 20% stake in STT GDC last year. KKR, of course, is also a capital partner in Singtel’s own Nxera, buying its stake at a valuation of 32 times trailing EV/Ebitda.
Singapore’s sovereign fund might have a hand to play in this. While Singtel stands pat that it operates independently and is guided by its board of directors, Temasek holds a 51.9% stake in Singtel. Temasek also owns STT GDC via another subsidiary, Singapore Technologies Telemedia, which controls StarHub as well.
Potential and promise
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If the AI boom lasts — and is not a bubble waiting to pop — Singtel and Nxera could see a bright growth opportunity.
For one, with the assets grown organically and those it potentially acquires, Singtel could consider a separate listing for Nxera, giving it its own platform to grow and raise capital. While Nxera’s growth is still in its early stages, demand has been promising, as Singtel announced that the Tuas DC has already presold about 54%. The second Thai DC has already presold approximately 25% before the real estate development is completed.
When asked about a potential listing, Lang says: “All options are open, but we don’t count our chickens before the eggs are hatched. The big 58MW DC in Tuas is only going to be operational in early 2026.”
He adds that the DCs in Malaysia, Thailand and Indonesia are also slated to “come online very soon” in the next 12 months.
While the data centre business grows, NCS, Singtel’s digital and technology services arm, is also expected to capture the tailwind of the AI boom. “We are the ones who build the AI use cases and digital capabilities,” says Ng Kuo Pin, CEO of NCS. On that note, Singtel’s AI strategy revolves around the roles of adopter, builder, provider and enabler of AI through its connectivity, digital infrastructure and digital services business. This then allows synergy between the parent company, Nxera and NCS.
Where is the growth?
On Nov 12, Singtel announced earnings surged some 176% y-o-y to $3.4 billion in 1HFY2026 ended Sept 30. The more than doubling was due to one-off gains, including the partial divestment of its Bharti Airtel shares.
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If exceptional items are excluded, Singtel’s underlying net profit increased 14% y-o-y to $1.35 billion, driven by operational improvements across its various associates and subsidiaries, including NCS. If reported at constant currency terms, the gain would have been slightly higher at 22% y-o-y.
Yuen calls the first half results a reflection of the positive momentum across the company’s diversified portfolio of businesses across the region.
Operating revenue decreased 1.2% to $6.9 billion, primarily due to the strength of the Singapore dollar. In constant currency terms, the group’s operating revenue, ebitda and operating company eBIT would have risen 1.9%, 4.9% and 14% respectively. Overall revenue declined due to the competitive consumer business, which offset growth from Optus, NCS and Digital Infraco.
“We expect our growth engines to change the complexion of the business in the mid-term as they continue to scale. Nxera’s Ebitda should achieve a more than 20% CAGR over the next four years as it progressively adds new operational data centre capacity. We also see NCS keeping up its business momentum on robust bookings,” says Yuen.
The regional associates’ post-tax profit contributions rose by 12% to $0.9 billion. In constant currency terms and excluding Intouch, their contributions would have increased 25%. This was thanks to higher contributions from Airtel Group’s performance in both India and Africa, as well as stronger profits from AIS in Thailand. This was slightly offset by weaker performance from Indonesia’s Telkomsel and Globe in the Philippines.
Lang shares that the group’s ongoing multi-year asset monetisation plan is underway and the group plans to recycle $9 billion in assets, with $5 billion in value already unlocked. “We will use the money for various things. $5 billion to fund our Value Realisation Dividend (VRD), $2 billion for our Value Realisation Share Buyback and $2 billion for growth opportunities,” says Lang, adding that growth opportunities are currently focused on the IT services and digital infrastructure segments.
From earnings generated from its operations and funds freed up from its asset monetisation, Singtel plans to pay out an interim dividend of 8.2 cents, 7 cents higher than a year ago. This interim dividend comprises a core dividend of 6.4 cents and a value realisation dividend of 1.8 cents.
Unlocking value
As part of its Singtel28 growth plan, Singtel is committed to unlocking $9 billion in value by 2028 from divesting its assets, which will be reinvested in the company and returned to shareholders. Currently, the $5 billion realised includes the sale of stakes in its tower network in Australia, the Comcentre property in Singapore and the Airtel stake.
Most recently, the group divested a 0.8% stake in its associate Airtel for $1.5 billion, booking a gain of $1.1 billion from the sale. This is the group’s fourth sale of stakes in Airtel since 2022. It currently holds about 27.5% stake in Airtel, worth an estimated $51 billion.
“In the longer term, we want to equalise our stake in Airtel with Sunil Mittal (founder and chairman of Airtel),” says Yuen. Currently, Mittal holds approximately 21%.
Meanwhile, Yuen and Lang still see long-term value in Optus. “Since the recent Triple Zero outage, we have been working with the Optus board and management to step up efforts to improve Optus’ operational capabilities as a critical services provider that will do right by its customers and all Australians,” says Yuen, adding that before the outage, the group had been reinforcing Optus’ financial standing and investing to improve its network resilience through support for Optus’ sizeable investments in capex and spectrum to improve customer experience.
“Improving resilience on these two fronts will enhance Optus’ business sustainability in the longer term,” adds Yuen. Optus may have the lowest return on invested capital in the Singtel portfolio, at just 1.7%, but it has been spending close to 20% of its revenue on capex investments to drive future growth.
Meanwhile, as the market awaits more clarity on Singtel’s data centre ventures, it is comfortable enough with the improvements in its operations to raise ebit growth guidance for the full year FY2026 from “high-single digit growth” to “high-single digit to low-double digit”.
With so-called market repair underway in its various regional associates’ markets following respective consolidation moves, Singtel expects to collect $1.1 billion worth of dividends in the same FY2026, up from an earlier projection of $1 billion. A similar repair is on the way here in Singapore, with the mobile business of M1, a subsidiary of Keppel, being sold to the company that operates Simba. “We expect Singapore telco business to benefit from recent sector consolidation in a nine to 12-month timeframe,” says DBS Group Research in a research note where it has kept its “buy” call and $5.04 target price on Singtel.
Yuen points out that market consolidation has already been happening in neighbouring countries, resulting in a healthier and more sustainable market.
“We believe that, for a sustainable market condition in any market — big or small — having two to three operators will be ideal. Not just for the operators, but also for consumers and enterprises, because this will [allow] operators to generate sufficient returns to reinvest… which will then provide better services to customers,” says Yuen, adding that he is aware that market consolidations do not equate to less competition.
Singtel shares reached new records following the results, extending a gain of some 50% year to date and valuing the company at some $78 billion. In its Nov 12 note, RHB Bank Singapore raised its target price from $4.90 to $5.20. “We continue to see progressive news flows on capital recycling and value-accretive acquisitions sustaining share price momentum,” says RHB, alluding to how the key thesis of Singtel’s return on invested capital and earnings enhancements from key growth engines are intact.
Similarly, Prem Jearajasingam of CGS International has raised his target price to $5.20 from $4.80, mainly from higher valuations over at Bharti Airtel, and with asset monetisation initiatives as the key re-rating catalyst.
He notes that Singtel is already trading at 23.7 times FY2027 earnings, which is as high as two standard deviations of its post-2009 trading range. Nonetheless, with FY2026 dividend yield estimated at 4.3%, the share price will see some valuation support, with upside from improved earnings and payout ratios, he says.
