Maybank Research Pte Ltd
April 17, 2025
Singapore Telecommunications (ST SP): A Defensive Shield Amidst Uncertainty
Investment Thesis: Developed Market Telcos Outshine
- Year-to-date (YTD), Singapore Telecommunications (Singtel) has outperformed its ASEAN peers and the local Straits Times Index (STI) by 23%. [[1]]
- Singtel’s YTD performance aligns with global developed market (DM) telcos, which are up 14% YTD, outperforming the global MSCI index by 19 percentage points. [[1]]
- DM telcos’ defensive characteristics, driven by tariff/macro uncertainty and safe-haven flows, serve as tailwinds. [[1]]
- Despite this outperformance, Singtel still exhibits a holdco discount exceeding 25%. [[1]]
- A 16% net profit after tax (NPAT) growth outlook and potential for higher capital returns (in addition to a 5% yield) act as upside catalysts. [[1]]
- Maybank reiterates a BUY rating on Singtel, raising the SoTP-based target price (TP) to SGD3.96, factoring in Bharti’s current market capitalization and increased valuations for AIS and Optus. [[1]]
4Q/2H FY25 Earnings Preview: Firm Delivery Expected
- Singtel is expected to deliver 15% year-over-year (YoY) and 10% half-over-half (HoH) earnings growth in 2HFY25 (results due late May). [[1]]
- Growth will be supported by associate pre-tax profit (PBT), up 18% YoY/15% HoH. [[1]]
- Optus earnings before interest and taxes (EBIT) growth is expected to increase by 53% YoY/1% HoH, and NCS EBIT growth by 44% YoY/1% HoH. [[1]]
- These gains are partially offset by forex weakness and challenges in the Singapore mobile market. [[1]]
- Optus remains on solid footing, preparing to raise prepaid pricing by 7-13% from April 28. [[1]] [[2]]
- Competition remains relatively benign. [[2]]
- Bharti and AIS are also performing well, with expected 2H PBT contributions rising 55% YoY and 29% YoY, respectively. [[2]]
- Singapore mobile revenues remain a concern, with service revenues expected to decline by 3% YoY. [[2]]
Singapore Competition: Challenges and Diversification
- A Singapore consumer survey indicates a strong preference for lower mobile spending and low-cost operators like Simba/MVNOs. [[2]]
- Competitive pressure is likely to persist, even with industry consolidation, as Simba prioritizes market share gains. [[2]]
- The impact of competition on Singtel is muted, with only 12-13% of group revenue from Singapore consumers. [[2]]
- Contribution to Singtel’s SoTP is less than 5%. [[2]]
Solid Yield and Potential Capital Return
- Despite tariff uncertainties and macro challenges, Singtel’s cash flows remain defensive. [[2]]
- Backed by a solid 1.6x net debt to EBITDA balance sheet, the dividend outlook of SGD16.6-20.2 cents is secure, leading to a 5% dividend yield. [[3]]
- Singtel has guided capital recycling initiatives of SGD6 billion, positioning it as a capital return candidate with a solid and defensive dividend yield. [[3]]
Company Description and Statistics
- Singtel is Singapore’s largest and Australia’s second-largest telco operator. [[3]]
- It has telecom exposure in India, Indonesia, Thailand, and the Philippines. [[3]]
- 52-week high/low (SGD): 3.69/2.32. [[3]]
- 3-month average turnover (USDm): 42.1. [[3]]
- Free float (%): 82.2. [[3]]
- Issued shares (m): 16,515. [[3]]
- Market capitalization: SGD60.9B / USD46.4B. [[3]]
- Major shareholders: Temasek Holdings Pte Ltd. (52.0%), Central Provident Fund (4.7%), The Vanguard Group, Inc. (1.6%). [[3]]
Price Performance and Financials
- Absolute performance: -1M (11%), -3M (18%), -12M (59%). [[3]]
- Relative to index: -1M (18%), -3M (24%), -12M (38%). [[3]]
Key Financial Metrics (FYE March, SGD m)
| Metric |
FY23A |
FY24A |
FY25E |
FY26E |
FY27E |
| Revenue |
14,624 |
14,128 |
14,529 |
14,911 |
15,263 |
| EBITDA |
3,686 |
3,597 |
3,953 |
4,198 |
4,405 |
| Core net profit |
2,054 |
2,261 |
2,556 |
3,069 |
3,632 |
| Core EPS (cts) |
12.4 |
13.7 |
15.5 |
18.6 |
22.0 |
| Core EPS growth (%) |
6.8 |
10.0 |
13.1 |
20.1 |
18.3 |
| Net DPS (cts) |
14.9 |
15.0 |
16.6 |
18.6 |
20.2 |
| Core P/E (x) |
19.8 |
18.5 |
23.8 |
19.9 |
16.8 |
| P/BV (x) |
1.6 |
1.7 |
2.5 |
2.4 |
2.4 |
| Net dividend yield (%) |
6.1 |
5.9 |
4.5 |
5.0 |
5.5 |
| ROAE (%) |
8.5 |
3.2 |
10.7 |
12.9 |
15.0 |
| ROAA (%) |
4.3 |
4.9 |
5.5 |
6.6 |
7.7 |
| EV/EBITDA (x) |
13.7 |
13.7 |
18.0 |
17.1 |
16.3 |
| Net gearing (%) (incl perps) |
22.9 |
14.6 |
26.7 |
28.7 |
28.8 |
| Consensus net profit |
– |
– |
2,548 |
2,916 |
3,405 |
| MIBG vs. Consensus (%) |
– |
– |
0.3 |
5.3 |
6.7 |
Other Companies Mentioned
- AIS (ADVANC TH, CP THB285, BUY, TP THB312) [[4]]
- Bharti Airtel (BHARTI IN, CP INR1,821, not rated) [[4]]
- Telkomsel (TLKM IJ, CP IDR2,570, BUY, TP: IDR4,500) [[4]]
- Globe Tel (GLO PM, CP PHP2,072, BUY, TP: PHP2,750) [[4]]
- Optus: 100%-owned by Singtel [[4]]
- NCS: National Computer System (100%-owned by Singtel) [[4]]
Visual Data Highlights
- Singtel’s YTD stock return is comparable to DM market peers, which have outperformed the MSCI World Index. [[2]]
- Singtel has massively outperformed its ASEAN peers and the domestic STI index YTD. [[2]]
- Optus prepaid pricing changes are effective from April 28, 2025. [[2]]
Optus Prepaid Pricing Changes
| Expiry |
Current price (AUD) |
New price (AUD) |
% increase |
Old data allowance |
New data allowance |
| 7 days |
12.0 |
13.0 |
8% |
3GB |
5GB |
| 28 days |
35.0 |
39.0 |
11% |
20GB |
25GB |
| 28 days |
45.0 |
49.0 |
9% |
30GB |
35GB |
| 28 days |
55.0 |
59.0 |
7% |
40GB |
45GB |
| 186 days |
160.0 |
180.0 |
13% |
80GB |
90GB |
| 365 days |
320.0 |
350.0 |
9% |
200GB |
220GB |
Singtel 2HFY25 Earnings Preview (SGD m)
|
2HFY24 |
1HFY25 |
2HFY25E |
YoY |
HoH |
| Operating revenue |
7,099 |
6,992 |
7,144 |
0.6% |
2.2% |
| Operating expenses |
-5,382 |
-5,172 |
-5,378 |
-0.1% |
4.0% |
| EBITDA |
1,718 |
1,820 |
1,767 |
2.9% |
-2.9% |
| Other income |
92 |
127 |
127 |
38.0% |
0.0% |
| EBITDA |
1,810 |
1,947 |
1,894 |
4.6% |
-2.7% |
| EBITDA margins |
25.5% |
27.8% |
26.5% |
|
|
| Share of associates’ pre-tax profits |
1,143 |
1,169 |
1,348 |
18.0% |
15.3% |
| EBITDA and share of associates’ pre-tax profits |
2,953 |
3,116 |
3,242 |
9.8% |
4.0% |
| D&A |
-1,237 |
-1,209 |
-1,202 |
-2.8% |
-0.6% |
| EBIT |
1,716 |
1,907 |
2,040 |
18.9% |
7.0% |
| Net finance expense |
-175 |
-175 |
-179 |
2.5% |
2.0% |
| Profit before exceptional items and tax |
1,542 |
1,731 |
1,861 |
20.7% |
7.5% |
| Taxation |
-398 |
-535 |
-548 |
37.7% |
2.5% |
| PAT |
1,144 |
1,196 |
1,313 |
14.8% |
9.7% |
| Minority interest |
-4 |
-7 |
-7 |
75.0% |
0.0% |
| Underlying net profit |
1,140 |
1,189 |
1,306 |
14.6% |
9.8% |
| Exceptional items (post-tax) |
-2,481 |
42 |
0 |
|
|
| Net (loss)/profit |
-1,341 |
1,232 |
1,306 |
-197% |
6% |
Singtel Operational Details
| SGD m |
4QFY24 |
3QFY25 |
4QFY25E |
YoY |
QoQ |
| Operating Revenue |
|
|
|
|
|
| Optus |
1,757 |
1,856 |
1,753 |
0% |
-6% |
| Singtel Singapore |
973 |
976 |
931 |
-4% |
-5% |
| NCS |
737 |
742 |
773 |
5% |
4% |
| Digital InfraCo |
102 |
102 |
104 |
2% |
2% |
| Intercompany |
63 |
47 |
46 |
-28% |
-3% |
| Group |
3,506 |
3,629 |
3,515 |
0% |
-3% |
| EBITDA |
|
|
|
|
|
| Optus |
480 |
479 |
496 |
3% |
4% |
| Singtel Singapore |
342 |
376 |
359 |
5% |
-5% |
| NCS |
55 |
83 |
88 |
60% |
6% |
| Digital InfraCo |
52 |
44 |
47 |
-10% |
6% |
| Corporate + Intercompany |
54 |
39 |
39 |
-27% |
1% |
| Group |
875 |
943 |
951 |
9% |
1% |
| EBIT (before associates’ contributions) |
|
|
|
|
|
| Optus |
66 |
91 |
108 |
64% |
19% |
| Singtel Singapore |
184 |
216 |
199 |
8% |
-8% |
| NCS |
36 |
63 |
68 |
89% |
8% |
| Digital InfraCo |
15 |
9 |
10 |
-35% |
9% |
| Less: Intercompany eliminations |
52 |
35 |
36 |
-32% |
2% |
| Group |
249 |
344 |
349 |
40% |
2% |
| Singtel Singapore (SGD m) |
|
|
|
|
|
| Mobile service revenues |
326 |
324 |
314 |
-4% |
-3% |
| Total revenues |
452 |
482 |
419 |
-8% |
-13% |
| Handset |
126 |
158 |
105 |
-17% |
-33% |
| Singtel others |
521 |
494 |
512 |
-2% |
4% |
| Singtel Singapore |
847 |
818 |
826 |
1% |
1% |
| Optus (AUD m) |
|
|
|
|
|
| Mobile service revenues |
1,000 |
1043 |
1,047 |
5% |
0% |
| Total revenues |
1,375 |
1,527 |
1,460 |
6% |
-4% |
| Handset |
375 |
484 |
413 |
10% |
-15% |
| Optus others |
619 |
609 |
609 |
-2% |
0% |
| Optus |
1,994 |
2,136 |
2,069 |
4% |
-3% |
Singtel SoTP Valuation
| Valuation |
Stake (%) |
Valuation (SGD m) |
Per share (SGD) |
Valuation method |
| SingTel Singapore Business |
100.0 |
12,570 |
0.76 |
Singtel DCF (8.0% WACC, 0.5% TG, 0.95 beta) |
| Optus |
100.0 |
11,713 |
0.71 |
Optus DCF (8.1% WACC, 0.5% TG, 0.95 beta) |
| Data center |
80.0 |
6,983 |
0.42 |
Nxera DCF (7.8% WACC, 3.0% TG, 0.90 beta) |
| Associates |
|
|
|
|
| Telkomsel (Indonesia) |
30.1 |
7,381 |
0.45 |
65% of listed Telkom at MIBG TP |
| Bharti Airtel (India) |
28.7 |
38,286 |
2.32 |
Market Cap less BTL debt |
| AIS (Thailand) |
23.3 |
8,297 |
0.50 |
Based on MIBG TP |
| Globe (Philippines) |
46.9 |
4,305 |
0.26 |
Based on MIBG TP |
| Intouch (Thailand) |
21.1 |
2,810 |
0.17 |
Based on MIBG TP |
| NetLink NBN Trust (Singapore) |
24.8 |
937 |
0.06 |
DDM (COE 6%, 0% LTG, 0.5 beta) |
| SingPost (Singapore) |
21.7 |
376 |
0.02 |
Based on MIBG TP |
| Associates Sub Total |
|
62,392 |
3.78 |
|
| Holdco discount |
|
-1.39 |
|
25% discount |
| (Less) Consol Net Debt |
|
-5,320 |
-0.32 |
|
| Total Equity Value |
|
|
3.96 |
|
Value Proposition
- Telco conglomerate with exposure to quality telco operators in ASEAN, India, and Australia. [[4]]
- Potential for cost and capex optimization with peaking 5G rollout. [[4]]
- Attractive dividend yield backed by a healthy balance sheet and favorable capital management/asset optimization initiatives. [[4]]
- Holdco discount of 30%. [[4]]
Singtel Underlying Earnings and Growth
Price Drivers
- Proposal for fourth mobile license. [[4]]
- Cut in final dividends to SGD5.45 cents vs. expectations of SGD10.70 cents. [[4]]
- Australia wireless pricing went through industry-wide reflation. [[4]]
- Optus cyberattack. [[4]]
- Optus network outage. [[4]]
Financial Metrics
- FY25-27 earnings are forecasted to increase at a 17% CAGR, mainly helped by associates. [[4]]
- Consolidated EBITDA is expected to post a 4% CAGR over FY24-27E, helped by moderate top-line growth and cost cuts. [[4]]
- Net debt to EBITDA, including associates, is expected to remain healthy at <2x in FY24-26E, providing support to its DPS commitment. [[4]] [[5]]
Swing Factors
- Upside: Potential rejig in Optus leading to RoIC and FCF improvement, stronger-than-expected ARPU growth due to easing in price competition, better-than-expected execution in meeting targeted cost savings. [[4]]
- Downside: Delays in Optus rejig and potential fines levied on Optus due to network outage, intensifying price competition in Singtel exposed markets, FX headwinds impacting Optus and associates. [[5]]
ESG Analysis
Risk Rating & Score: 18.5 [[5]]
Score Momentum: -0.0 [[5]]
Controversy Score: 0 – No reports [[5]]
Business Model & Industry Issues
- Singtel faces cybersecurity and personal data leakage risks due to its business nature. [[5]]
- The company supports digital inclusion by connecting communities and assisting the disadvantaged. [[5]]
- Singtel is aligned with peers in addressing ESG issues. [[5]]
Material E Issues
- In FY23, Singtel completed a comprehensive review of SBTi target for revalidation and brought forward net-zero goal to 2045 from 2050. [[5]]
- Reduced scope 1 and 2 absolute emissions by 11.31%. [[5]]
- GHG emissions intensity improved from 0.035tCO2 e/TB to 0.030tCO2 e/TB. [[5]]
- Completed four solar energy generation projects amounting to 1.38MWp. [[5]]
Key G Metrics and Issues
- The Board consists of 14 directors, with 43% being female. [[5]]
- Nomination, audit, investment, and remuneration committees are chaired by independent directors. [[5]]
- Key management compensation accounted for 0.6% of total employee compensation and 0.8% of group net profit in FY23. [[5]]
- No corruption cases reported for the past three years. [[5]]
- Cyber security and data leakage risks are addressed through adherence to data protection laws. [[5]]
Material S Issues
- In Sep 2022, Optus suffered a cyber-attack that resulted in the exposure of some customers’ personal information. [[5]]
- In Nov 2023, Optus suffered a network outage leading to a government-ordered investigation. [[5]]
- 31% of female employees in middle and top management. [[5]]
- Recognized by the 2023 Bloomberg Gender Equality Index for the fifth consecutive year. [[5]]
- Total training investment of SGD57.9m over FY21-23 and pledged SGD32.1m over FY24-25 to boost digital skills. [[5]]
- Zero fatality rate across Singtel and Optus in FY23. [[5]]
Quantitative Parameters
| Particulars |
Unit |
2020 |
2021 |
2022 |
Starhub (STH SP, FY22) |
| E |
|
|
|
|
|
| Scope 1 GHG emissions |
m tCO2e |
5.73 |
5.77 |
5.67 |
1.96 |
| Scope 2 GHG emissions |
m tCO2e |
1.29 |
1.33 |
1.33 |
0.47 |
| Total |
m tCO2e |
7.02 |
7.10 |
7.00 |
2.43 |
| Scope 3 GHG emissions |
m tCO2e |
N/A |
3.06 |
3.27 |
N/A |
| Total |
m tCO2e |
7.02 |
10.16 |
10.27 |
N/A |
| GHG intensity (Scope 1 and 2) |
tCO2e/t |
0.68 |
0.66 |
0.67 |
0.63 |
| Energy intensity |
GJ/ton |
15.37 |
15.73 |
15.76 |
11.43 |
| Share of renewable energy use in operations |
% |
N/A |
N/A |
N/A |
N/A |
| Wastewater discharge (chemical O2 demand) |
tonnes |
153.7 |
177.8 |
171.4 |
22.7 |
| Hazardous waste 3R rate |
% |
70% |
85% |
75% |
98% |
| Air emissions intensity |
ton/kT |
2.83 |
2.21 |
2.42 |
N/A |
| NPE (New Plastic Economy) investments |
MYR m |
8 |
3 |
3 |
N/A |
| S |
|
|
|
|
|
| % of women in workforce |
% |
35.4% |
54.8% |
54.4% |
42% |
| % of women in management roles |
% |
20% |
28% |
32% |
20% |
| Lost time injury frequency rate |
number |
0.4 |
0.4 |
0.3 |
3 |
| G |
|
|
|
|
|
| Group CEO salary as % of net profit |
% |
0.43% |
0.43% |
0.18% |
0.18% |
| Top 10 employees salary as % of profit |
% |
1.11% |
2.97% |
0.71% |
1.2% |
| Independent director on board |
% |
70% |
83% |
85% |
54% |
| Women directors on board |
% |
40% |
25% |
31% |
23% |
Qualitative Parameters
- ESG Policy: Yes, the group has a Board Sustainability Committee chaired by the CEO. [[6]]
- Senior Management Salary Linked to ESG Targets: No. [[6]]
- TCFD Framework: Yes. [[6]]
- Scope 3 Emissions: Yes, Singtel has developed a full Scope 3 indirect GHG emissions inventory and baseline for operations in Singapore and Australia. [[6]]
- Carbon Mitigation/Water/Waste Management Strategies: Replacing chillers, UPS, and converting to energy-efficient mobile base stations in Singapore. [[6]]
- Carbon Offset: Yes. [[6]]
Targets
| Particulars |
Target |
Achieved |
| Singtel Group Scope 1 and 2 to reduce by 25% by 2025 |
25% |
3.3% |
| Scope 3 target to reduce 30% by 2030 |
30% |
Not disclosed |
| CDP rating |
A- |
A- |
| Zero fatality and well-being score |
80% |
82% |
| One million digitally enabled persons and SMEs by 2025 |
1,000,000 |
740,000 |
Overall ESG Score: 85
| ESG score |
Weights |
Scores |
Final Score |
| Quantitative |
50% |
88 |
44 |
| Qualitative |
25% |
83 |
21 |
| Target |
25% |
80 |
20 |
| Total |
|
|
85 |
Singtel displays a high degree of transparency in its ESG disclosures. [[6]]
Key Metrics
| Key Metrics |
FY23A |
FY24A |
FY25E |
FY26E |
FY27E |
| P/E (reported) (x) |
19.2 |
50.6 |
23.8 |
19.9 |
16.8 |
| Core P/E (x) |
19.8 |
18.5 |
23.8 |
19.9 |
16.8 |
| P/BV (x) |
1.6 |
1.7 |
2.5 |
2.4 |
2.4 |
| P/NTA (x) |
2.7 |
2.5 |
4.0 |
3.8 |
3.6 |
| Net dividend yield (%) |
6.1 |
5.9 |
4.5 |
5.0 |
5.5 |
| FCF yield (%) |
6.9 |
2.8 |
4.2 |
6.5 |
8.4 |
| EV/EBITDA (x) |
13.7 |
13.7 |
18.0 |
17.1 |
16.3 |
| EV/EBIT (x) |
45.5 |
42.8 |
49.5 |
44.1 |
40.0 |
Income Statement (SGD m)
|
FY23A |
FY24A |
FY25E |
FY26E |
FY27E |
| Revenue |
14,624.0 |
14,128.0 |
14,528.9 |
14,911.3 |
15,262.8 |
| EBITDA |
3,685.9 |
3,597.0 |
3,953.2 |
4,198.0 |
4,405.3 |
| Depreciation |
(2,262.0) |
(2,163.0) |
(2,073.6) |
(2,115.7) |
(2,152.0) |
| Amortisation |
(312.0) |
(281.0) |
(440.7) |
(457.5) |
(457.5) |
| EBIT |
1,111.9 |
1,153.0 |
1,438.8 |
1,624.7 |
1,795.8 |
| Net interest income /(exp) |
(359.0) |
(303.0) |
(337.7) |
(389.6) |
(397.7) |
| Associates & JV |
2,287.0 |
2,338.0 |
2,622.3 |
3,264.3 |
3,935.9 |
| Exceptionals |
171.5 |
(1,466.0) |
0.0 |
0.0 |
0.0 |
| Other pretax income |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
| Pretax profit |
3,211.4 |
1,722.0 |
3,723.5
|
