UOB Kay Hian
Date of Report: Friday, 23 May 2025

Singtel’s 2025 Earnings: Robust Profitability, Share Buyback, and Bright Dividend Outlook Power Growth

Executive Summary

Singapore Telecommunications Limited (Singtel), a leading integrated communications and digital services company, has delivered its FY25 results with solid profit growth, margin improvement, and a shareholder-friendly move with its first-ever share buyback program. UOB Kay Hian maintains a BUY rating, raising the target price to S\$4.58, signaling a bullish outlook grounded in operational resilience, capital recycling, and attractive dividend prospects.

Company Snapshot

• Ticker: ST SP
• GICS Sector: Communication Services
• Market Cap: S\$65.2 billion (US\$50.5 billion)
• Shares Issued: 16,501.3 million
• Major Shareholder: Temasek Holdings (52%)
• 52-Week Price Range: S\$3.99 / S\$2.38
• Dividend Yield (FY25): ~4.3%

Key Investment Highlights

• ROIC Momentum: Singtel targets double-digit return on invested capital (ROIC) for FY26-27, underpinned by better profitability in core mobile, strong associate contributions, and operational execution from NCS and Digital InfraCo (Nxera).
• Capital Recycling: Identifiable capital recycling capacity raised to S\$9 billion (from S\$6 billion), unlocking potential for higher dividends and narrowing the holding company discount.
• Inaugural Share Buyback: Announced a three-year S\$2 billion share buyback program to enhance shareholder value.

Financial Performance Overview

Segment Performance & Analysis

Optus (Australia): Market Repair and Margin Recovery

• Revenue: Flat at S\$7,134 million (constant currency growth +1.4% yoy)
• Mobile Service Revenue: +4.1% yoy, driven by postpaid price increases and prepaid customer growth
• Enterprise Revenue: -12.3% yoy, reflecting ongoing market challenges
• EBITDA: +5.7% yoy; EBIT surged +55% yoy due to cost discipline
• Postpaid ARPU: Improved to A\$44/month (FY24: A\$42)
• Prepaid ARPU: Slightly lower at A\$19/month (FY24: A\$20)

Singapore Consumer: Navigating Intense Competition

• Operating Revenue: S\$3,808 million, down 2.1% yoy
• Mobile Service Revenue: -0.5% yoy amid fierce pricing battles
• ICT Revenue: +1.5% yoy, offsetting declines in equipment sales (-6.6% yoy)
• EBITDA: +1.8% yoy, thanks to cost-out initiatives
• EBITDA Margin: Expanded by 1.2ppt yoy
• Postpaid ARPU: Stable at S\$33/month; postpaid subscribers fell by 13,000 qoq
• Prepaid ARPU: Stable at S\$9/month; prepaid subscribers dropped 72,000 qoq
• Mobile Market Share: Down to 44.6% at FY25-end (from 45.1%)

NCS: Sustained Growth and Margin Expansion

• Revenue: S\$2,979 million, +5.1% yoy, led by Gov+ subsegment growth
• EBITDA: +24.5% yoy; EBIT +38.5% yoy, driven by cost efficiencies and higher revenue
• Orderbook: S\$3.2 billion as of FY25, supported by new wins and renewals
• 4QFY25 EBITDA: +46.3% yoy; margin expanded by 2.5ppt yoy

Digital InfraCo (Nxera): Data Centres Drive Future Potential

• Revenue: S\$434 million, +5.1% yoy; Nxera (data centres) revenue +9.2% yoy on robust demand
• EBITDA: -3.3% yoy due to higher maintenance and investment costs
• Capacity Expansion: Upcoming launches in Thailand (80% presold) and Tuas (50% presold) expected to contribute from mid-2025 and early-2026
• Outlook: Investment costs to taper; incremental earnings expected from FY26 onwards

Regional Associates: Key Earnings Contributors

• Strongest growth came from Bharti Airtel (+31.3%) and AIS (+21.3%)
• Telkomsel and Globe saw declines, while Intouch posted marginal growth

Dividend and Shareholder Return Initiatives

• Core Dividend (FY25): 12.3 S cents/share (FY24: 11.2 S cents/share)
• Value Realisation Dividend (VRD, FY25): 4.7 S cents/share (FY24: 3.8 S cents/share)
• Total Dividend Yield: ~4.3% annualised
• Share Buyback: Inaugural S\$2 billion program over three years; shares repurchased will be cancelled

Capital Recycling and Value Unlocking

• Raised Capital Recycling Goal: S\$9 billion, up from S\$6 billion
• Sources: Sale of stakes in associates (notably Bharti Airtel and Gulf), and non-core fixed assets
• Use of Proceeds: Expected to fund higher dividends, especially towards the upper end of the 70-90% underlying PATMI payout range for FY26
• Additional VRD Potential: Each S\$1 billion in cash could add 5-6 S cents/share in VRD, boosting yield by 1.5%

Valuation and Outlook

• Valuation Method: Switched from DCF to SOTP (Sum-of-the-Parts) to better reflect intrinsic value amid monetisation plans
• Target Price: Raised to S\$4.58 (from S\$3.58); fair value per share S\$6.10 before a 25% holding company discount
• Key Catalysts: Monetisation of 5G, data centres, and/or NCS; further market repair in Singapore
• Risk: Slight reduction in FY26-27 profit expectations (-1-2%) on lowered growth assumptions; FY28 estimates added

Profit & Loss, Balance Sheet, and Cash Flow Highlights

Conclusion: Investment Case for Singtel

Singtel’s FY25 results showcase a transformed and resilient business, reinforced by strong associate performance, disciplined cost management, and a clear commitment to shareholder returns through dividends and buybacks. The company’s raised capital recycling target and focus on monetisation of assets signal further upside for investors, while robust cash flows and improving ROIC underpin the long-term growth story. With attractive yield and a raised target price, Singtel stands out as a compelling choice for investors seeking stability and upside in the communications sector.

Disclosures

This research was prepared by UOB Kay Hian. For jurisdictional and regulatory details, refer to the original document’s disclosures and disclaimers.