Maybank Investment Bank (Maybank), in its latest update on Singapore Telecommunications (ST SP) today (July 1, 2024), highlighted significant developments from Singtel’s recent actions in the telecommunications sector.
Singtel’s associate Bharti Airtel implemented a substantial price increase in India’s mobile plans, ranging from 10% to 21%, aiming for an average hike of 15%. This move by Bharti Airtel is expected to bolster its revenues and EBITDA significantly over FY25-27, potentially lifting earnings by INR28-42 billion (SGD452-677 million) during this period, factoring in a 25% corporate tax rate.
Maybank has accordingly adjusted Singtel’s target price (TP) upward by 4% to SGD3.40, reflecting the enhanced valuation of Bharti Airtel, now valued at INR1444 per share based on current market conditions. This adjustment is underpinned by Maybank’s forecast of a 7-9% revenue increase for Bharti Airtel’s India mobile segment over the next few fiscal years.
Moreover, Maybank revised its earnings estimates for Singtel, anticipating a 4-8% increase in core net profit for FY25-27, driven by the positive impact of higher mobile prices in India. The bank reiterates its BUY recommendation on Singtel, citing a persistent holdco discount of 39% despite several positive catalysts and operational improvements.
Singtel’s strategic initiatives, including potential dividends supported by earnings growth and capital recycling plans, further bolster Maybank’s confidence in the stock. The telecom giant’s management aims to deploy SGD6 billion in capital over the medium term, possibly including proceeds from a small divestment in Bharti Airtel.
Investors are encouraged to consider Singtel as a compelling investment opportunity amidst its sector-leading position across ASEAN, India, and Australia. Maybank’s TP of SGD3.40 implies a potential upside of 29% from the current share price of SGD2.75, underscoring its bullish outlook on Singtel’s prospects in the evolving telecommunications landscape.
Maybank Investment Bank affirms Singtel as a BUY, highlighting its strong earnings trajectory, attractive dividend potential, and strategic capital management initiatives. Despite the persisting holdco discount, Singtel remains poised for robust growth, making it an appealing choice for investors seeking exposure in the telecom sector.
