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.
Headwinds are easing. Singtel is forecasted to post mid-single digit EBITDA growth in FY2022, a turnaround from the 16% decline in the prior year financial period. Stabilising Singapore average revenue per user (ARPU) and higher Optus ARPU may drive EBITDA growth higher. Furthermore, dividends from associates, which make up more than 25% of operating cash flow, may finally be turning around, driven mainly by the easing of competition of associate Bharti Airtel.
Defence over offence. Risk of recession is rising due to the surge in oil prices, which will also be exacerbated by the US Federal Reserve hiking rates. Massive surges in oil prices have historically preceded recessions, as was the case in 2008, early 2000s and 1991. It is thus prudent to move to defence over offence in the current environment.
Consensus estimates. Consensus has an overall positive outlook on Singtel, with 16 BUYS / 2 HOLDS / 0 SELL, and a 12m TP of S$3.16 (+26% upside potential). EPS is forecasted to finally grow 303% and 20% in FY2022 (YE March) and FY2023. The stock offers a decent dividend yield of 3.9% for FY2022 and 4.9% for FY2023.
