<Alert> Singtel – Investment in Bank Fama signals regional ambitions
- Singtel has acquired a 16.3 per cent stake Bank Fama for a cash consideration of S$48 million
- While a small investment, it signals that Singtel-Grab digital banking partnership is not limited to the mature market of Singapore
- Singtel targets divestment of S$2bn from its non-core assets in the medium term, which should help to keep its payout ratio north of 75%. Maintain BUY with unchanged TP of S$3.13
Singtel has acquired a 16.3 per cent stake Bank Fama for a cash consideration of S$48 million. The telco has acquired 2.4 billion new shares issued by Bank Fama International. The investment is part of Singtel’s plans to pursue banking opportunities in Indonesia. Fama’s investors include Nasdaq-listed digital services player Grab, which is also in a joint venture with Singtel to operate a digital bank in Singapore
While a small investment, it signals that Singtel-Grab digital banking partnership is not limited to the mature market of Singapore. It may also signal that Singtel-Grab may joinly pursue opportnities in more lucrative underbanked regions of Southeast Asia and not just Indonesia as Grab has a dominant presence in many Southeast Asian countries. Bank Fama is majority owned by EmTek, which is a key shareholder of Bukalapak (BUKA). With the merger of Go-To, GRAB has formed strategic partnership with EmTek last year. Another interesting part is investment in another small bank – Allo Bank – by BUKA recently. If we connect the dot, it seems like BUKA, GRAB, Emtek and Singtel are expanding the partnerships and want to make a move in digital banking. One can speculate that the big picture could consolidation of these small banks eventually due to capital requirement and we can hear more news on M&A about smaller banks.
Singtel targets divestment of S$2bn from its non-core assets in the medium term. These non-core assets include such loss-making units of Amobee, Trustwave and infrastructure assets such as fibre ducts in Australia and Comcentre building in Singapore. This should also provide sufficient buffer for such growth- investments while mantainings its payout ratio north of 75%.
Maintain BUY on Singtel with unchanged TP of S$3.13 for its 4% yield and 9% earnings CAGR over FY22F-24F (March YE)