Broker: UOB Kay Hian
Date of Report: 11 July 2025

Singtel’s Strategic Growth: Robust Earnings, Asset Monetisation, and Shareholder Value in 2025-2028

Overview: Singtel’s Strong Performance and Strategic Roadmap

Singapore Telecommunications Limited (Singtel) continues to impress in 2025, strengthening its position as a leading telecommunications provider across Asia-Pacific. With a diversified service portfolio spanning fixed-line, mobile, data, internet, TV, and digital solutions, and operations in Australia, India, Indonesia, Thailand, and the Philippines, Singtel is delivering robust earnings and sustainable value to shareholders. The group’s strategic “ST28” growth plan is paying off, driving enhanced return on invested capital (ROIC), operational excellence, and future growth through its subsidiaries NCS and Nxera.

Stock Snapshot and Recent Performance

• Share Price: S\$4.01
• Target Price: S\$4.58 (14.2% upside)
• Market Cap: S\$66.2 billion (US\$51.8 billion)
• Shares Issued: 16,512.6 million
• Major Shareholder: Temasek Holdings (50.3%)
• 52-week High/Low: S\$4.02 / S\$2.80
• Dividend Yield (FY26F): 4.5%
• YTD Price Performance: +30.2%

Operational and Financial Highlights

ROIC Improvement and FY26 Outlook

• ROIC has climbed from 7.3% in FY22 to 9.6% in FY25, with the group targeting double-digit ROIC for FY26.
• Key drivers include enhanced core business profitability, a S\$600 million cost-out program by FY26, higher contributions from regional associates (especially Bharti Airtel), and robust revenue growth from NCS and Nxera.

Asset Monetisation Pipeline Expansion

• Singtel has raised its asset monetisation pipeline target from S\$6 billion to S\$9 billion, with internal estimates suggesting it could reach as high as S\$15 billion.
• The group may reduce its effective stake in Bharti Airtel from 28% to match the founding Mittal family’s 22% over the next 2-3 years. At current share prices, this could yield S\$4 billion in cash from a 3% stake sale.
• Additional non-core fixed assets, including landbanks, are identified for medium-term monetisation.

Sustainable Value-Realisation Dividends (VRD)

• Singtel is guiding for value-realisation dividends of 3-6 cents per share over FY26-28, with estimates pointing towards at least 5 cents per share, translating to an additional 1.5% dividend yield per S\$1 billion in cash realised.
• A three-year S\$2 billion share buyback programme has been initiated; repurchased shares will be cancelled.

Key Financials: 2024-2028

Optus: Cash Flow and Profitability in Focus

Optus, Singtel’s Australian subsidiary, is leveraging market repair to drive higher ARPU (Average Revenue Per User) and operational efficiency. Key earnings drivers include:

• ARPU Expansion: Room for revenue uplift as market pricing normalizes.
• Cost Optimization: Optus is expected to contribute significantly to the group’s S\$200-250 million in annual cost savings.
• Efficient CAPEX: Network-sharing arrangements with TPG will reduce CAPEX-to-revenue intensity below 20% as infrastructure and spectrum are shared in regional Australia, while both brands remain competitive in urban markets.

Nxera: The Group’s Next Growth Engine

Nxera, Singtel’s infrastructure and data centre unit, is positioned as a major growth catalyst. Highlights include:

• Capital Raising: Nxera plans to expand its regional data centre footprint via strategic partnerships, mirroring its S\$1.1 billion, 20% stake sale to KKR.
• Data Centre Expansion: Recent launches include a 25MW facility in Thailand (with AIS and GULF Energy). Singapore’s 60MW TUAS and a 64MW Johor Bahru data centre (with Telekom Malaysia) are slated for completion by 2026. Nxera’s capacity is on track to double to 400MW.

Valuation and Investment Recommendation

• Singtel is rated a BUY, with a sum-of-the-parts (SOTP) target price of S\$4.58.
• Key catalysts for re-rating include successful monetisation of 5G and enterprise businesses, data centre/NCS monetisation, and further market repair in Singapore.
• Improving business fundamentals, a solid 4.5% dividend yield for FY26, and a robust asset recycling pipeline make Singtel an attractive defensive play amid market volatility.

SOTP-Based Valuation Breakdown

Profit & Loss, Balance Sheet, and Cash Flow Forecasts

Key Metrics and Profitability Ratios

• EBITDA Margin (2026F): 27.9%
• Pre-Tax Margin (2026F): 26.1%
• Net Margin (2026F): 18.8%
• ROA (2026F): 5.8%
• ROE (2026F): 10.6%
• Debt to Total Capital (2026F): 32.2%
• Net Debt/Equity (2026F): 37.2%
• Interest Cover (2026F): 11.6x

Conclusion: Singtel—A Defensive, High-Quality Play for Investors

Singtel is well-positioned to deliver consistent earnings growth, attractive dividends, and potential upside through strategic asset monetisation. With clear execution on its ST28 plan, a strong balance sheet, and multiple catalysts in play, Singtel stands out as a top pick for investors seeking stability and growth in the telecommunications sector. The BUY rating and S\$4.58 target price underscore its compelling risk-reward profile in today’s market.