Date of Report: October 24, 2024
Broker: CGS International

Overview of SingTel

SingTel, a leading telecommunications company based in Singapore, is one of the largest telecom operators in Asia. The company has significant operations not only in Singapore but also in Australia through its subsidiary, Optus, and stakes in regional associates.

Strong Earnings Forecast for 1H FY25

1. Expected Core Net Profit:

   • SingTel is projected to deliver a core net profit of S$1.20 billion to S$1.22 billion for the first half of FY25, marking an increase of 7-9% year-on-year. This growth is mainly driven by robust EBIT (Earnings Before Interest and Taxes) performance.

2. EBIT Growth:

   • EBIT is anticipated to rise by 18% year-on-year, showcasing strong operational performance. This increase is attributed to effective cost management and revenue growth across its business segments.

Operational Efficiency and Strategic Moves

1. Opex Reductions and Efficiency:

   • The company has implemented concerted operational expense (opex) cuts, which have positively impacted its operational efficiency. This has been a significant factor driving EBIT growth for SingTel.
   • The removal of Trustwave’s losses, following its divestment in January 2024, has also contributed to improving the operating profit margin (OPM) for both SingTel and Optus.

2. Improved Profit Margins:

   • The elimination of Trustwave’s losses has led to an uplift in OPM, particularly for SingTel’s Singapore operations as well as its Australian arm, Optus.

Stock Performance and Investment Opportunity

1. Recent Share Price Softness:

   • Despite the strong financial performance, SingTel’s share price has experienced some softness. Analysts see this as a buying opportunity, suggesting that the stock is currently undervalued.
   • The recent dip presents an opportunity for investors to accumulate shares at a favorable price.

2. Target Price and Recommendation:

   • CGS International has reiterated an “Add” recommendation on SingTel, raising the target price to S$3.70. This revision is based on higher valuations of its associates, including Bharti, Intouch, and AIS.

Analyst Commentary

The report reflects a positive outlook for SingTel, underpinned by strong EBIT momentum and effective cost-cutting strategies. The company’s strategic divestments and operational efficiencies have set a solid foundation for sustained growth, leading analysts to recommend accumulating shares. The upward revision of the target price further underscores confidence in SingTel’s business strategy and future performance.