Singtel (STEL.SI) Stock Analysis: FY25 Review, Dividend Growth & BUY Rating (May 2025)

Broker Name: OCBC Investment Research Private Limited

Date of Report: May 26, 2025

Singtel: Capital Management and Growth Initiatives Drive Optimistic Outlook

Investment Thesis

Singtel, a leading communications technology group in Asia, is strategically positioned to capitalize on growth trends in 5G, digital businesses, and National Computer Systems (NCS). Focused on reinvigorating its core business, Singtel aims for low double-digit returns on invested capital (ROIC) through cost efficiency, margin improvements, and scaling growth engines like NCS and its regional data center business [[1]].

FY25 Performance Highlights

* Dividend per share (DPS) increased by 13.3% year-on-year (YoY) to 17.0 Singapore cents, including a special value realization DPS of 4.7 Singapore cents [[1]].
* EBITDA grew 5.4% YoY, marking a turnaround after six years of decline [[1]].
* Asset sales target raised from SGD6 billion to SGD9 billion [[1]].

Investment Summary

Singtel demonstrated a strong finish to FY25, with operating revenue marginally increasing by 0.8% YoY to SGD7.2 billion in 2HFY25. EBITDA rose 1.9% YoY to SGD1.8 billion, maintaining a stable EBITDA margin of 25.8%. Associates’ post-tax profit contributions saw a 13% YoY increase, driven by robust performances from Airtel Group and AIS, which were partially offset by lower contributions from Telkomsel and Globe [[1]].

A net exceptional gain of SGD1.5 billion, primarily from the partial disposal of the Comcentre property and Airtel’s gains, led to a reported PATMI of SGD2.8 billion, compared to a net exceptional loss in the previous corresponding period. On an underlying basis, PATMI increased by 12.3% YoY to SGD1.3 billion in 2HFY25. For the full year, EBITDA grew by 5.4% YoY to SGD3.8 billion [[1]].

Security Information

* Ticker: STEL.SI [[1]]
* Market Cap (USD b): 49.9 [[1]]
* Daily Turnover (SGD m): 92.9 [[1]]
* Free Float: 42% [[1]]
* Shares Outstanding (m): 16,501 [[1]]
* Top Shareholder: Temasek Holdings Pte. Ltd. (52.0%) [[1]]

Financial Summary (SGD m)

Key Ratios

Operational Improvements and Future Outlook

Singtel’s business segments are showing improved performance. Optus saw revenue and EBITDA increases of 2.7% and 4.0% YoY, respectively, in 2HFY25, driven by better mobile performance due to price increases in postpaid plans. Singtel Singapore’s revenue decreased by 3.3% YoY due to the decline in legacy carriage services, but EBITDA was up 1.0% YoY due to cost optimization. NCS continued its robust growth, with revenue and EBITDA growing 7.6% and 25% YoY, respectively, driven by strong demand for Gov+ business and cost efficiency [[2]].

Digital InfraCo reported a revenue growth of 2.1% YoY, but EBITDA fell 5.3% YoY due to higher property-related expenses from scheduled data center maintenance and increased staff costs to support business expansion [[2]].

Management has provided growth guidance for FY26, projecting high single-digit EBIT growth (excluding associates’ contributions) and cost savings of SGD200 million in Singtel Singapore and Optus. Total CAPEX is expected to grow from SGD2.4 billion in FY25 to SGD2.5 billion in FY26, with core CAPEX of approximately SGD1.7 billion and growth CAPEX of SGD0.8 billion, mainly in areas like data centers, artificial intelligence (AI), digitalization, and satellites [[2]].

Singtel generated SGD1.9 billion of recycling cash proceeds in FY25. Following the recent sale of a 1.2% stake in Airtel for SGD2 billion in mid-May, the company has achieved more than half of its SGD6 billion mid-term asset recycling target set last year and has raised the target to SGD9 billion. This is expected to provide additional room for further cash return to shareholders via value realization DPS (3-6 Singapore cents per annum). A new share buyback program of up to SGD2 billion over the next three years has also been announced [[2]].

Singtel’s share price has increased 25% year-to-date (YTD), outperforming the STI (+2%). This outperformance is attributed to its defensive nature amid market uncertainties, enhanced shareholder returns with an attractive dividend yield, and improved earnings, which are expected to continue supporting the company’s share price performance [[2]].

Results Highlights (SGD m)

Fair Value and Recommendation

OCBC Investment Research raises its SOTP-based fair value from SGD4.00 to SGD4.51, primarily due to a lower holding company discount [[3]]. The recommendation for Singtel is BUY.

ESG Updates

Singtel’s ESG rating was downgraded in Oct 2024 due to weaknesses in labor management practices. Optus signed an enforceable undertaking with Australia’s Fair Work Ombudsman (FWO) for alleged underpayment of workers in Feb 2024. The underpayment was attributed to lapses in human resources and subpar systems for payroll and attendance. Singtel lags behind better-performing peers in labor management, particularly in performance-based variable pay [[3]].

The company also faces data privacy risks due to handling end-user data in regions with stringent data privacy laws. While Singtel conducts checks on its third-party vendors’ cybersecurity practices, it appears to lack detailed incident response mechanisms. Singtel leads most global peers in overall governance practices. As of Sep 2024, the state-owned entity’s board no longer features government representatives, which may allay potential government intervention concerns. Moreover, Singtel provides business ethics training to all employees, including contractors [[3]].

Potential Catalysts

* Stronger-than-expected recovery in associates’ contributions [[3]]
* Significant dividend hike [[3]]
* Strong recovery from Covid-19 [[3]]
* Further asset monetization [[3]]

Investment Risks

* Prolonged forex headwinds [[3]]
* Further cuts to dividend [[3]]
* Stronger-than-expected competition in Singapore and/or Australia [[3]]
* Inability of strategic review to unlock value from initiatives [[3]]

Valuation Analysis

Company Overview (as of 31 Mar 2025)

Singtel delivers a comprehensive suite of services, including mobile, broadband, and TV, to consumers. For businesses, Singtel provides workforce mobility solutions, data hosting, cloud services, network infrastructure, analytics, and cyber security capabilities. The Group has a presence in Asia, Australia, and Africa, reaching over 760 million mobile customers in 21 countries. Its infrastructure and technology services for businesses span 21 countries, with over 428 direct points of presence in 362 cities [[5]].

FY25 Revenue Breakdown

* Singtel Singapore (26.9%) [[5]]
* Optus (50.4%) [[5]]
* NCS (21.1%) [[5]]
* Digital InfraCo (3.1%) [[5]]
* Eliminations (-1.5%) [[5]]

FY25 Share of Associates’ Pre-Tax Profits

* Telkomsel (26.9%) [[5]]
* AIS (16.4%) [[5]]
* Airtel (39.7%) [[5]]
* Globe (10.8%) [[5]]
* Intouch (6.0%) [[5]]

Adj. Earnings Per Share (S cents)

* FY2021: 10.6 [[5]]
* FY2022: 11.7 [[5]]
* FY2023: 12.4 [[5]]
* FY2024: 13.7 [[5]]
* FY2025: 15.0 [[5]]

Dividends Per Share (S cents)

* FY2021: 7.50 [[5]]
* FY2022: 9.30 [[5]]
* FY2023: 14.90 [[5]]
* FY2024: 15.00 [[5]]
* FY2025: 17.00 [[5]]

Company Financials

Income Statement (In Millions of SGD except Per Share)

Profitability Ratios

Credit Ratios