Samantha Chiew Published on Mon, Aug 30, 2021
DBS Group Research is keeping a “buy” recommendation on Singapore Telecommunications (Singtel) with an increased target price of $3.13 from $3.01 previously, on improving core business and higher market value of Globe Telecom for its fintech business.
Analyst Sachin Mittal believes that the telco is poised or a recovery and that the stock is trading at 36% holding company discount based on the market cap of its associates.
“The holding company discount has expanded to 36% (vs a 21% average over the last seven years) due to a sharp decline in the core business in Singapore and Australia in FY2021. We expect the holding company discount to narrow to 10-15% due to a sustained multi-year improvement in the core business from FY2022 onwards,” says Mittal in an Aug 26 report.
Meanwhile, Mittal expects earnings recovery for Singtel after four years of decline and asset divestments. He expects earnings to benefit from catalysts such as, improving core earnings before interest, taxes, depreciation, and amortisation (EBITDA) in FY2022 after a 16% decline in FY2021; approximately $300 million rise in post-tax earnings from Bharti; as well as a partial divestment of Optus towers to unlock value.
As much as the stock is expected to ride out its recovery, Singtel on Aug 30 announced at its ‘Powering Up Singapore with 5G’ online event that it is ramping up efforts in translating its new strategic blueprint of leading in 5G into action as it launched a number of 5G Standalone (SA) use cases.
The new use cases span a variety of sectors from entertainment to mobility and showcases the benefits of 5G by redefining live, work and play experiences with fast speeds and near-instantaneous response times. With that, Singtel still continues to expand its 5G network which now covers over two-thirds of Singapore.
Some of the entertainment experiences launched by Singtel and powered by its 5G SA include 5G-powered remote racing in Sentosa, 4K live streaming at the SEA Aquarium, enhancing arts and culture experience in collaboration with the National Gallery Singapore and Esplanade, as well as co-creating the future of hybrid work in a collaboration with Samsung and Zoom.
Speaking at the event, Minister for Communications and Information Josephine Teo highlighted the role of 5G, “Mobile networks and data exchanges are key building blocks for the digital infrastructure. 5G, which promises to be ultra-fast and supports near-zero latency, can change the way we live and work in profound ways, and become essential for the digital developments of the future. Building a digital future is certainly about the hardware, software, systems and standards. It is equally about the people and skills. For that, the Government will continue to invest in reskilling and upskilling our people so that they can achieve not just digital literacy but digital mastery. This way, everyone can benefit from the infrastructure.”
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Yuen Kuan Moon, Group CEO of Singtel said, “With the maturing of 5G technology, we’re excited to unlock the benefits of a 5G-enabled reality for consumers and enterprises. Its potential to transform business models and deliver enhanced products and services on a scale like never before, will spur Singapore’s digital economy as the country moves into post-Covid recovery. As part of our strategic reset to focus on 5G, we are accelerating our roll-out and the creation of new services. We’re proud to be leading the 5G charge and forging the next chapter of this digital era.”
As at 12.45pm, shares in Singtel are trading at $2.38 or 18.9 times FY2022 earnings with a dividend yield of 3.7%.
Photo: The Edge Singapore/ Albert Chua