PhillipCapital analyst Paul Chew has kept his "accumulate" call on Singtel with an unchanged target price of $3.05 after attending Singtel's Investor Day on Aug 31.
In his report dated Sept 5, Chew notes that a key highlight from the session was the recovery in mobile prices in Singapore, Australia, India and Indonesia from the "benign competition" and the return of roaming revenue.
"Business segments with softer outlooks include AIS and NCS. Softer AIS outlook is due to intense competition, and for NCS it is the near-term ramp-up in headcount and staff cost," the PhillipCapital analyst writes.
The team at RHB Group Research is also keeping "buy" on Singtel with an unchanged target price of $3.55, as it sees Singtel "staying on course".
To them, Singtel's asset recycling programme is "sufficient" to meet its incremental 5G capex and growth initiatives with a good buffer for dividends.
"Price and market repair are near/mid-term catalysts, with enterprise and regional data centres (RDC) as longer-term drivers," the team writes.
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To the RHB team, Singtel remains its preferred telco pick among the Singapore telcos.
To Maybank Securities analyst Kelvin Tan, Singtel is also his top pick among the telcos in Singapore.
Tan, who has also kept his “buy” call with an unchanged target price of $3.15, is positive on Singtel’s commitment to improve its return on invested capital (ROIC) to the high single-digits in the mid-term.
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To recap, this will be done by delivering on enterprises’ 5G innovation for monetisation as well as capturing growth opportunities in data centres and IT services amid enterprises’ increased spending on digitisation. In addition, Singtel intends to leverage on the positive price momentum in India, Indonesia and Australia to grow its average revenue per user (APRU). It also aims to unlock value from asset recycling and capital partnerships to fund growth investment.
On NCS’s target to improve its revenue to $5 billion in the FY2026 from FY2022’s $2.4 billion through expanding its regional talent pool, Maybank’s Tan expects NCS’s ebit pressure to persist in the next one to two years due to the rising cost of talent. The ebit pressure will also stem from the impact cost of NCS’s recent acquisitions in Australia.
In the FY2023 to FY2025, Tan sees Singtel as being able to pay dividends at the top end of its 60% to 80% payout policy. The telco is “comfortable” with its current net debt/ebitda of 1.6x for the 1QFY2023.
“Proceeds from announced asset recycling programme [of around] $6 billion would fully cover incremental 5G capex and growth initiatives over the next few years,” he adds.
In the same period, Tan is forecasting Singtel’s ebitda to register a 5.9% earnings CAGR due to the recovery following Covid-19.
“Pre-tax associate income could contribute to bottom line by growing 27% in the same period, led by Bharti’s swing to net profit from net loss,” he writes.
“We expect net debt to ebitda, including associate dividends, to remain healthy at 1.6x-2.2x in FY2023-FY2025; providing support to its fixed distribution per share (DPS) commitment,” he adds.
As at 2.46pm, shares in Singtel are trading 3 cents higher or 1.12% up at $2.72.
