Singtel provides an extensive range of telecommunications and digital services to consumers and businesses across Asia, Australia, Africa and the US. It serves over 753 million mobile customers in 21 countries, including Singapore, Australia (via wholly-owned subsidiary Singtel Optus) and the emerging markets of India, Indonesia, the Philippines, Thailand and Africa.
Oversold. Shares of Singtel have lost around 10% from their 1-year high of S$2.63, driven partly by the broad-based selling due to the new Covid variant – Omicron. RSI of 26 indicates oversold conditions, while shares are now within the 1-year accumulation band (see graph below).
Improving outlook. Consensus anticipates an improving outlook for Bharti as the Indian wireless industry becomes a quasi-duopoly, which should drive revenue and earnings growth going forward. Meanwhile, its 100%-owned Australian subsidiary, Optus, is seeing a better competitive environment as operators remove discounts and are offering less bonus data.
Banking on digital. In the next 12-24 months, a key driver will be Singtel’s digital banking plans together with its partner, Grab Holdings. The Singtel-Grab consortium will allow it to take deposits and offer banking services to retail and corporate customers. For now, we think Singtel’s share price has not factored in contribution from the digital bank business, and will likely be a positive boost to its shares when visibility emerges.
Consensus estimates. Consensus has an overall positive outlook on Singtel, with 17 BUYS / 2 HOLDS / 0 SELL, and a 12m TP of S$3.08 (+31% upside potential). EPS is forecasted to finally grow 31% and 18% for FY2022 (YE March) and FY2023. The stock offers a decent dividend yield of 4.3% for FY2022 and 5.1% for FY2023.