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]]
