CGS International May 12, 2025 SingTel Downgraded to Hold: A Time to Pause? Summary SingTel has been downgraded from an “Add” to “Hold,” with a target price (TP) increased to S\$4.00 ahead of its 4QFY3/25 results due on May 22. [[1]] FY3/25F core net profit is maintained at S\$2,516m and DPS of 16.7 Scts, but the RNAV-derived TP is raised from S\$3.75 to S\$4.00. [[1]] Valuations are at 22.2x FY26F P/E, which is +1 standard deviation of its trading range, acting as a cap post-2020, while a 4.9% FY26F dividend yield provides downside support. [[1]] Earnings Momentum and Seasonality SingTel’s 4QFY3/25 results are expected to show continued earnings momentum. [[1]] 4QFY3/25F EBITDA and EBIT are projected to expand by 6.2% yoy and 19.7% yoy, respectively, delivering S\$2,516m (+11.3% yoy) in FY25F core net profit (CNP). [[1]] Sequentially, results are expected to show typical seasonality with CNP down 5% qoq. [[1]] A final DPS of 6.9 Scts (82% payout ratio) is expected, along with a 4.2 Scts value realization dividend (VRD), bringing FY25F DPS to 16.7 Scts. A more generous VRD payment could be a key surprise. [[1]] Revised Target Price and Rationale The RNAV-derived TP on SingTel has been raised from S\$3.75 to S\$4.00, but the recommendation is downgraded from “Add” to “Hold”. [[2]] The TP increase is attributed to higher associate valuations, driven by the increased value of Bharti, whose share price is up 18% YTD. [[2]] SingTel’s plan to reduce its 29% stake in Bharti to 24%, similar to the Mittal family’s holdings, could unlock S\$8bn in value for shareholders over time. [[2]] Recent increases in SingTel’s share price are due to a flight to safety post-trade tariff announcements. Further share price upside may be limited as this trade unwinds. [[2]] A key upside risk would be buoyant Indian equity markets allowing SingTel to pare down its stake faster or at a higher price. Every Rs100/sh increase in Bharti’s share value adds S\$0.12/sh to SingTel’s TP. [[2]] Valuation and Recommendation The FY26F P/E of 22.2x is at +1 standard deviation of its post-2012 12-month forward P/E trading range, marking peaks since 2021. [[3]] SingTel’s 4.9% FY26F dividend yield should provide downside support. [[3]] Key upside risks include continued strength in Bharti’s share price, faster monetization of its stake in Bharti, increased global fund flows into EM telcos, and stronger-than-expected EBIT development at core Singapore and Australian operations. [[3]] Key downside risks include escalation in competition in Singapore/Australia and regulatory shifts leading to negative cash flow/earnings impact. [[3]] Financial Summary The following table summarizes key financial data for SingTel: Financial Summary Mar-23A Mar-24A Mar-25F Mar-26F Mar-27F Revenue (S\$m) 14,624 14,128 14,122 14,524 15,145 Operating EBITDA (S\$m) 3,686 3,597 3,826 3,987 4,209 Operating EBITDA Margin 25.2% 25.5% 27.1% 27.4% 27.8% Net Profit (S\$m) 2,225 795 3,197 2,904 3,180 Core EPS (S\$) 0.12 0.14 0.15 0.18 0.19 Core EPS Growth 6.8% 10.1% 11.3% 15.4% 9.5% FD Core P/E (x) 31.36 28.47 25.59 22.17 20.24 DPS (S\$) 0.15 0.15 0.17 0.19 0.21 Dividend Yield 3.82% 3.85% 4.28% 4.85% 5.33% Associate Performance Bharti is the biggest driver of associate post-tax contributions. [[3]] Value realization dividends are expected to keep dividend levels elevated. [[3]] Revenue Trajectories Improved revenue trajectories are estimated for both SingTel’s Singapore and Australian operations. [[3]] Improved EBITDA contributions to the group are expected almost equally from both Singapore and Australia. [[3]] ASEAN Telco Valuation Matrix Data as at 12 May 2025 [[4]] Company Bloomberg Ticker Rec. Market Cap (US\$ m) Core P/E (x) CY25F Core P/E (x) CY26F P/BV (x) CY25F P/BV (x) CY26F Recurring ROE (%) CY25F Recurring ROE (%) CY26F EV/EBITDA (x) CY25F EV/EBITDA (x) CY26F Dividend Yield (%) CY25F Dividend Yield (%) CY26F Telekom Malaysia T MK Add 6,229 14.2 12.5 2.5 2.3 17.7% 18.9% 6.1 5.4 4.2% 4.8% Axiata Group AXIATA MK Add 4,571 16.7 13.9 0.9 0.9 5.3% 6.3% 3.4 3.2 4.7% 4.0% CelcomDigi Bhd CDB MK Hold 10,611 25.0 20.6 2.8 2.8 11.3% 13.6% 9.7 8.9 3.8% 4.7% Maxis Berhad MAXIS MK Add 6,885 19.8 19.3 4.9 4.8 24.9% 25.0% 9.2 9.0 4.8% 5.1% SingTel ST SP Hold 49,265 22.9 20.7 2.5 2.5 10.9% 12.1% 14.6 13.5 4.3% 4.9% Starhub STH SP Hold 1,542 13.4 12.0 3.2 3.0 24.0% 25.8% 6.6 6.1 5.9% 6.7% PT Telkom TLKM IJ Add 15,512 10.3 9.8 1.8 1.7 17.5% 17.5% 4.1 4.0 7.9% 8.2% Indosat ISAT IJ Add 3,535 11.1 8.8 1.6 1.5 15.6% 17.9% 3.9 3.7 5.1% 6.4% XL Axiata EXCL IJ Hold 2,368 12.8 11.6 1.0 1.0 7.9% 8.4% 3.7 3.5 4.7% 5.2% Adv Info Services ADVANC TB Hold 26,924 22.7 22.6 8.9 8.6 39.7% 38.7% 9.0 8.4 3.9% 4.0% True Corp TRUE TB Hold 13,110 38.0 22.6 5.5 4.9 14.9% 23.0% 7.4 6.8 1.3% 2.2% Sarana Menara TOWR IJ Add 1,843 8.6 8.3 1.5 1.3 18.0% 16.7% 6.9 6.5 4.0% 4.0% Tower Bersama Infra TBIG IJ Hold 2,811 24.9 21.3 3.5 3.2 14.5% 15.7% 12.1 11.6 1.8% 2.0% ESG Analysis Singtel is ranked as the top ASEAN telco for sustainability. [[5]] Key strengths include a robust cybersecurity system, industry-leading staff training, ambitious net-zero carbon emissions targets by 2045F, and leadership in driving financial inclusion. [[5]] ESG Highlights and Implications Singtel is committed to achieving net-zero emissions by 2045F. [[5]] Initiatives include internal carbon pricing, ESG-linked executive remuneration, and the introduction of half-sized SIM cards in Singapore. [[5]] Good ESG performance may attract more interest from ESG-focused investors in the medium to longer term. [[5]] Trends and Implications Singtel’s carbon emissions fell 11% yoy in FY3/23 and were 20% lower vs. FY3/15. [[5]] The Environmental pillar may gain importance due to Singtel’s growing data center business and Singapore’s increasing carbon tax. [[5]] A bigger and faster increase in the carbon tax or harsher penalties could impact Singtel’s earnings. [[5]] Key Financial Metrics P/BV vs ROE: Positive correlation between Return on Equity (ROE) and Price to Book Value (P/BV). [[6]] 12-mth Fwd FD Core P/E vs FD Core EPS Growth: Inverse relationship between forward P/E and core EPS growth. [[6]] Detailed Financials Profit & Loss (S\$m) (S\$m) Mar-23A Mar-24A Mar-25F Mar-26F Mar-27F Total Net Revenues 14,624 14,128 14,122 14,524 15,145 Gross Profit 3,686 3,597 3,826 3,987 4,209 Operating EBITDA 3,686 3,597 3,826 3,987 4,209 Depreciation And Amortisation -2,574 -2,444 -2,433 -2,507 -2,561 Operating EBIT 1,112 1,153 1,393 1,479 1,648 Financial Income/(Expense) -359 -303 -331 -332 -322 Pretax Income/(Loss) from Assoc. 2,287 2,338 2,508 2,979 3,205 Non-Operating Income/(Expense) 172 -1,466 681 0 0 Profit Before Tax (pre-EI) 3,212 1,722 4,252 4,127 4,530 Taxation -978 -919 -1,043 -1,210 -1,335 Profit After Tax 2,234 804 3,209 2,918 3,195 Minority Interests -8 -9 -12 -14 -15 Net Profit 2,225 795 3,197 2,904 3,180 Cash Flow (S\$m) (S\$m) Mar-23A Mar-24A Mar-25F Mar-26F Mar-27F EBITDA 3,686 3,597 3,826 3,987 4,209 Cash Flow from Invt. & Assoc. -1,653 -1,827 -1,362 -1,754 -2,105 Change In Working Capital 270 -70 85 -93 -39 Other Operating Cashflow 3,762 3,867 2,970 3,926 3,536 Net Interest (Paid)/Received -416 -444 -460 -441 -427 Tax Paid -352 -347 -341 -289 -335 Cashflow From Operations 5,298 4,776 4,718 5,335 4,839 Capex -2,162 -2,150 -2,066 -1,831 -1,768 Acq. Of Subsidiaries/investments 1,553 662 1,500 500 500 Other Investing Cashflow -1,693 1,735 -1,941 -436 -448 Cash Flow From Investing -2,302 247 -2,507 -1,767 -1,716 Debt Raised/(repaid) -641 662 -187 -188 -189 Dividends Paid -1,964 -2,146 -2,542 -2,909 -3,219 Other Financing Cashflow -336 -509 -467 -448 -434 Cash Flow From Financing -2,941 -1,993 -3,196 -3,545 -3,841 Total Cash Generated 55 3,030 -985 23 -718 Free Cashflow To Equity 2,355 5,685 2,024 3,380 2,935 Free Cashflow To Firm 3,412 5,467 2,672 4,009 3,550 Balance Sheet (S\$m) (S\$m) Mar-23A Mar-24A Mar-25F Mar-26F Mar-27F Total Cash And Equivalents 1,668 4,605 4,237 3,765 3,246 Total Debtors 5,013 5,006 4,952 5,073 5,282 Inventories 346 301 303 300 308 Total Other Current Assets 1,556 448 448 448 448 Total Current Assets 8,583 10,360 9,940 9,587 9,284 Fixed Assets 10,385 10,047 10,411 10,509 10,501 Total Investments 11,788 12,758 11,802 12,181 12,682 Intangible Assets 10,990 8,227 9,565 9,336 9,104 Total Other Non-Current Assets 4,785 4,807 4,807 4,807 4,807 Total Non-current Assets 37,947 35,838 36,586 36,833 37,094 Short-term Debt 471 24 24 24 24 Total Creditors 5,310 5,406 5,261 5,341 5,518 Other Current Liabilities 2,518 2,219 2,219 2,219 2,219 Total Current Liabilities 8,299 7,649 7,504 7,584 7,761 Total Long-term Debt 7,142 8,225 8,038 7,850 7,662 Total Other Non-Current Liabilities 5,074 5,359 5,359 5,359 5,359 Total Non-current Liabilities 12,217 13,584 13,397 13,209 13,021 Total Liabilities 20,516 21,234 20,901 20,793 20,782 Shareholders’ Equity 25,998 24,928 25,583 25,577 25,539 Minority Interests 16 37 42 49 57 Total Equity 26,014 24,965 25,625 25,626 25,596 Key Ratios Key Ratios Mar-23A Mar-24A Mar-25F Mar-26F Mar-27F Revenue Growth (4.66%) (3.40%) (0.04%) 2.85% 4.28% Operating EBITDA Growth (2.16%) (2.41%) 6.38% 4.19% 5.56% Operating EBITDA Margin 25.2% 25.5% 27.1% 27.4% 27.8% Net Cash Per Share (S\$) -0.36 -0.22 -0.23 -0.25 -0.27 BVPS (S\$) 1.58 1.51 1.55 1.55 1.55 Gross Interest Cover 2.67 2.60 3.03 3.36 3.86 Effective Tax Rate 30.5% 53.3% 24.5% 29.3% 29.5% Net Dividend Payout Ratio 88% 270% 80% 100% 101% ROIC (%) 2.90% 3.25% 4.65% 4.55% 5.07% ROCE (%) 3.34% 3.87% 4.55% 4.73% 5.25% Return On Average Assets 5.18% 2.20% 7.43% 6.78% 7.38% Key Drivers Key Drivers Mar-23A Mar-24A Mar-25F Mar-26F Mar-27F Singapore total mobile subs (m) 4.3 4.6 4.6 4.7 4.7 Optus total mobile subs (m) 10.4 10.5 10.7 11.0 11.2 Singapore blended mobile ARPU (S\$/mth/sub) 26.4 25.2 24.4 24.3 24.4 Optus blended mobile ARPU (A\$/mth/sub) 31.0 31.6 32.3 32.6 32.6 Recommendation Framework Add: The stock’s total return is expected to exceed 10% over the next 12 months. [[12]] Hold: The stock’s total return is expected to be between 0% and positive 10% over the next 12 months. [[12]] Reduce: The stock’s total return is expected to fall below 0% or more over the next 12 months. [[12]]
