Singapore Telecommunications (Singtel) is expected to maintain its dividend mandate after the company – through a consortium with Grab Holdings – secured a digital full banking licence, according to UOB KayHian.
The brokerage says it sees “little earnings impact” in the near term and assumes the digital bank under the Grab-Singtel consortium will take four-to-five years to break even.
“In addition, an initial $600m equity injection is manageable as we expect Singtel to maintain its dividend mandate,” UOBKH analyst Chong Lee Len writes in a note dated Dec 7.
For 1HFY21 ended Sept 30, Singtel declared an interim net dividend per share of 5.1 cents.
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This is based on 100% net profit payout, which is above UOBKH’s expectation of 7.5 cents a share (50% payout) for the year.
According to UOBKH, the digital bank allows Singtel to stack new business segment to help drive future earnings growth and diversify away from its key telco mature assets.
SEE: Singtel appoints Anna Yip as deputy CEO of Singapore consumer business
UOBKH has a “buy” call for the stock with a target price of $2.84.
As at 11.33 am, Singtel was up 5 cents or 2.2% at $2.36 with 15.7 million shares changed hands.
