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
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