Date: October 24, 2024
Broker: CGS International Securities Pte. Ltd.

Company Overview
SingTel (Singapore Telecommunications Limited) is one of the largest telecommunications companies in Singapore and Southeast Asia. The company provides a comprehensive range of telecommunication services, including mobile, broadband, and digital solutions. SingTel also has a significant presence in various regional markets through its subsidiaries and associates.

Earnings Preview for 1HFY25

• Core Net Profit: Expected to be between S$1.20 billion to S$1.22 billion, representing a 7-9% year-on-year increase. This growth is primarily driven by strong earnings before interest and taxes (EBIT), which is forecasted to grow by 18% year-on-year.
• Operating Profit Margin (OPM): The OPM is likely to see an uplift due to cost-cutting measures and the removal of losses from Trustwave, which was divested in January 2024. Both SingTel’s Singapore operations and its Australian subsidiary, Optus, are expected to benefit from these improvements.

Key Drivers

1. Operational Efficiency: SingTel has undertaken concerted efforts to cut operating expenses, which, combined with the divestment of Trustwave, is expected to enhance profitability.
2. Associate Valuations: Higher valuations of its associates, including Bharti, Intouch, and AIS, have contributed to the improved financial outlook.
3. Growth in Core Operations: The company’s robust EBIT growth indicates strong performance in its core telecommunications business, which continues to drive profitability.

Analyst Comments
The analyst highlights that recent share price softness presents a good opportunity for accumulation. The positive forecast for 1HFY25, driven by operational improvements and strategic moves, supports a continued positive outlook for SingTel. The broker reiterates an “Add” recommendation, with a target price raised to S$3.70 due to higher valuations of key associates.

Conclusion
SingTel’s strategic focus on cost management and the divestment of underperforming assets, such as Trustwave, have strengthened its financial position. With positive EBIT momentum and strong contributions from regional associates, SingTel is poised for continued growth. Investors may consider taking advantage of the recent share price dip to accumulate positions, supported by the broker’s raised target price and favorable outlook.