On his first day of taking the helm on Jan 1, Singapore Telecommunications’ (Singtel) new group CEO Yuen Kuan Moon said, “The start of a new year is a time to reflect and move forward with renewed purpose.”
As Yuen takes his seat at the top, Singtel will also be undergoing a restructuring to position the group to capture new digital growth. On the last day of 2020, it created a new portfolio under its Group Enterprise division, which is dedicated to driving its 5G Enterprise business across the region by leveraging Singtel’s regional footprint.
“The move to help businesses accelerate their digital transformation comes as companies embrace new business models and race to go digital in response to Covid-19 and the resulting changes that travel restrictions and lockdowns have had on the broader business landscape,” says the group.
Singtel’s ICT arm, NCS, which is the largest ICT services provider in Southeast Asia, will report directly to Yuen to accelerate NCS’s expansion into Asia Pacific, with a special focus on Australia and China.
Leveraging on 5G, Yuen emphasises that this is not just a stronger and faster connection for mobile phone users. “5G is going to be more than just a connectivity play for us and this refocus of the business will allow us to go after the digital growth that 5G will fuel as a plethora of use cases and business models emerge,” he says.
“With Covid-19 also changing the game for companies, we see this as an opportune time to reset our business and prioritise areas where we see the greatest opportunities for growth by leveraging our extensive footprint across Asia,” adds Yuen.
NCS is wasting no time to fulfil its resolutions. Barely three weeks following the announcement, NCS on Jan 18 expanded its footprint in China by launching the NEXT Shenzhen Innovation Centre (SIC) to help enterprise clients accelerate digital transformation. Located in Tian’an Cloud Park in Shenzhen, it will develop 5G-enabled Internet of Things (IoT) applications, digital twin and blockchain solutions.
Ng Kuo Pin, CEO for NCS, says, “It forms the perfect gateway for us to serve Singaporean clients who are looking to enter and expand into the Chinese market, and for our Chinese clients to venture into Southeast Asia and the Asia Pacific.”
Overall, analysts are upbeat on Singtel and most have the stock as its top pick within the telco space.
Maybank Kim Eng has a “buy” recommendation with a target price of $2.88. “The stock has rebounded 25% from its decade low but we see further upside as recovery is underway, driven by upswing from Bharti in FY2022. We see deep value in the stock and it is backed by 5.1% yield,” says analyst Kareen Chan, who believes the telco’s recovery this year will be led by its associates. Chan now deems the stock is undervalued as the market is ascribing almost zero value to Singtel’s core business in Singapore and Australia.
Meanwhile, RHB Group Research have a “neutral” stance on the local telco sector as its risk-reward profile is balanced after the sharp correction in 2020. However, it is keeping Singtel at “buy” call with a target price of $3.10, while keeping the stock as its top pick.
Amid dwindling consumer revenue, RHB sees the enterprise segment as a key industry growth driver in 2021–2022 for the telcos. “We see corporate digitalisation initiatives and demand for hosted connectivity services (cloud and cybersecurity) solutions in the new normal/post pandemic period driving good enterprise gains for the telcos,” says RHB.
RHB is upbeat on Singtel’s new CEO. “We view its recent transformation exercise positively — most notably, the transfer of international operations under the Group CFO’s office and the creation of NCS as an autonomous unit. This should provide stronger oversight on the performance of its associates, strengthen capital management prospects, and unlock the value of core investments,” says RHB.
Furthermore, as a recipient of one of two digital full bank licences (DFB), SingTel stands to benefit from new financial revenue streams, with good upselling opportunities across its extensive customer base in the longer term.
