PhillipCapital analyst Paul Chew has upgraded Singapore Telecommunications (Singtel) Z74 to “buy” from “accumulate” due to the telco’s recent share price weakness.
Shares in Singtel have been falling steadily since a month ago, dropping from $2.62 as at the close of July 24 to $2.33 on Aug 23.
While Singtel’s revenue and ebitda for the 1QFY2024 ended June 30 stood within Chew’s expectations at 23% of his FY2024 forecast, he notes that the 9% decline in the Australian dollar (AUD) and drop in Optus’ margins were a drag on the telco’s earnings.
“Optus remains the weakest spot for the group with ebit declining 28% y-o-y in local currency terms to $56 million. Despite the larger revenue and market size, Optus ebit is only 23% of Singapore operations,” he points out.
On this, Chew has lowered his FY2024 revenue and ebitda estimates by 2% to account for the weakness in the AUD. Accordingly his sum-of-the-parts (SOTP) target price is lowered to $2.80 from $2.84 previously.
“Valuations are attractive but any re-rating for Singtel will come from its $6 billion asset monetization efforts, better cost controls at Optus, mobile price restoration and broadband growth,” he says.
“The growth areas for Singtel are NCS, Digital Infraco, Telkomsel broadband and Bharti. However, any growth will be offset by weakness in Optus and Singapore Singtel’s legacy enterprise business. We believe these factors will keep Singtel’s growth outlook muted,” he adds.
See the rest of the analysts' take on Singtel's results here.
As at 4.39pm, shares in Singtel are trading 2 cents higher or 0.86% up at $2.35.
