RHB Investment Bank
Report Date: 22 July 2025

Singtel’s Regional Data Centre Expansion and Capital Recycling: A Deep Dive into Growth Prospects, ESG Leadership, and Financial Performance

Introduction: Singtel’s Strategic Transformation Accelerates

Singapore Telecommunications (Singtel), the Asia-Pacific’s largest integrated telecommunications group, is making bold moves to cement its leadership in digital infrastructure and sustainable value creation. RHB Investment Bank’s latest analysis maintains a strong BUY rating on Singtel, raising the target price to SGD 4.70 (13% upside), underpinned by rapid expansion in its data centre (DC) business, robust financials, and a solid ESG profile.

Key Investment Highlights

• Target Price Upgrade: New SOP-based target price of SGD 4.70, incorporating a 4% ESG premium, with an attractive projected FY25 yield of circa 5%.
• Sector Top Pick: Singtel is highlighted as a top sector pick, with improving return on invested capital (ROIC), proactive capital management, and strong earnings execution as key re-rating drivers.
• ESG Leadership: Exceptional governance standards and meaningful progress in emissions reduction, with an overall ESG score of 3.3 out of 4.

Nxera Data Centres: The Next Growth Engine

Singtel’s digital infrastructure arm, Nxera, is at the heart of the company’s mid-to-long term growth strategy. The group is making significant strides in building and monetizing hyperscale, AI-ready data centre capacity across Asia.

• Malaysia (Iskandar Puteri, Johor): The joint venture with Telekom Malaysia is on track, with Phase 1 of the AI-DC (64MW, scalable up to 200MW) set to be ready for service in 4Q26. Early site works, including land levelling and piling, are progressing smoothly.
• Thailand: A 35% JV with Gulf Energy and Advanced Info Service has already seen 80% of its DC capacity pre-sold ahead of its June 2025 launch.
• Singapore (Tuas): The new 58MW Tuas DC, expected to be commissioned in January 2026, has more than 50% of its capacity pre-sold. This state-of-the-art facility features liquid cooling and access to Nvidia’s latest GB200 GPUs, offering AI/GPU-as-a-service for clients seeking scalable AI capabilities without major infrastructure investment.
• Long-term Vision: By end-2026, 200MW of DC capacity will be operational, with a longer-term ambition of 400MW. Nxera’s EBITDA is projected to grow at a 29.8% CAGR between FY26-FY28, accounting for approximately 6% of group EBITDA by FY28.
• Japan Expansion: Management is eyeing entry into the Japanese data centre market for the next phase of regional growth.
• Submarine Cable Project: Singtel is part of the Asia United Gateway East consortium, expected to deliver enhanced sub-sea connectivity for DCs by 3Q29, supporting surging AI-related demand.

Capital Recycling and Shareholder Value

Singtel’s disciplined capital recycling strategy is another cornerstone for value creation.

• Airtel Stake: Singtel’s 28.3% holding in Airtel is currently worth over SGD 48 billion (~69% of Singtel’s market capitalization). Management plans to progressively reduce this stake to match the Mittal family’s 23% level, potentially unlocking more than SGD 8 billion (53 cents per share) in cash.
• Dividends: Such divestments will support the up-sized SGD 9 billion target for mid-term capital recycling, with variable realization dividends (VRD) sustaining yields of approximately 5% for FY26–FY28. Each 1% sell-down in Airtel could raise 10-11 cents per share.

ESG Leadership: Strong Progress Across All Pillars

Singtel’s ESG performance stands out among regional peers.

• Overall ESG Score: 3.3 out of 4 (E: 3.0, S: 3.0, G: 4.0).
• Emissions: Scope 1 and 2 emissions fell by 30.5% from the 2015 baseline, surpassing the FY25 target of a 25% reduction. Total emissions declined 8% year-on-year in FY25.
• Renewable Energy: 20.4% of electricity consumption in FY25 was backed by renewables, up from 9.3% in FY24.
• Governance: The Board boasts 84% independent directors and 25% female representation, with full transparency on director remuneration.
• Social: Despite facing cybersecurity and network outages at its Australian subsidiary Optus, Singtel continues to invest heavily in workforce training and diversity initiatives, earning a place on the Bloomberg Gender-Equality Index.

Financial Performance and Outlook

Singtel’s financials reflect consistent improvement across profitability, margins, and cash flow, with robust outlook through FY28.

• EBITDA: Grows from SGD 3,597m in Mar-24 to SGD 4,707m in Mar-28F.
• Net Profit Margin: Improves from 5.0% in Mar-24 to 22.8% in Mar-28F.
• Operating EBITDA Margin: Rises steadily to 30.2% by Mar-28F.
• Capex-to-Sales: Declines from 15.2% in Mar-24 to 14.1% in Mar-28F, indicating improving capital efficiency.

Risks to Monitor

Key risks include intensified mobile market competition, potential earnings volatility, and SGD currency weakness. Nonetheless, Singtel’s diversified regional footprint and strong balance sheet provide resilience.

Valuation and Recommendation History

Singtel has consistently been rated as a BUY by RHB, with rising target prices reflecting the company’s improved financials, strategic positioning, and ESG enhancements. The latest recommendation remains a BUY with a target price of SGD 4.70.

Conclusion: Singtel’s Investment Case Strengthens

Singtel’s ambitious expansion in digital infrastructure, disciplined capital recycling, and leading ESG credentials position it as an outstanding investment in Asia’s telecommunications and data economy. With robust financials, growing dividends, and a clear path to value creation from its data centre and associate stakes, Singtel stands out as a compelling long-term opportunity for investors seeking sustained growth and income in the region’s digital future.