SingTel - CGS-CIMB Research 2022-09-01: Clearer Focus On Improving Return On Invested Capital (ROIC)

SingTel - Clearer Focus On Improving Return On Invested Capital (ROIC)

SINGTEL (SGX:Z74) | SGinvestors.ioSINGTEL (SGX:Z74)
  • Refer to SingTel's Announcements for presentation slide of SingTel's Investor Day 2022.
  • SingTel (SGX:Z74) aims to improve its Return on Invested Capital (ROIC) to high-single digits in the mid-term (FY22: 5.4%), by:
    1. capturing growth opportunities in data centres (DCs) and IT services as enterprises increase spending on digitalisation;
    2. leveraging positive price momentum in India, Indonesia, and Australia to grow ARPU;
    3. deliver on enterprises’ 5G innovation; and
    4. continued focus on cost/capex optimisation.
  • SingTel is comfortable with its current net debt/ EBITDA (1QFY23: 1.6x), while proceeds from its announced asset recycling programme now fully cover incremental 5G capex and growth initiatives. Hence, we think it will be able to pay FY23-25F dividends at the top-end of its 60-80% payout policy.
    • Bharti believes that another round of price hikes may be able to lift its ARPU by Rs30-40 (1QFY23: Rs183) and ROIC to 12-13% (1QFY23: 8-9%).
    • For Singapore and Optus, roaming revenue has rebounded nicely to 45-50% of pre-COVID-19 levels, despite borders of the big North Asian markets still closed. Meanwhile, SingTel Singapore’s 5G subcribers (ARPU uplift of S$10-15) rose 2.4x from Sep 21 to Mar 22 to 480k (17% of postpaid subs).
    • NCS targets to grow its revenue from FY22’s S$2.4bn to S$5bn by FY26F. To achieve this, it plans to expand its staff force from 12k to 20k, though the additions will mainly come from lower cost locations (i.e. Vietnam and India). Coupled with the impact from its acquisitions, NCS said EBIT pressure will likely persist over the next 1-2 years.
    • For its regional data centre (RDC) platform, SingTel aims to build-up its capacity 4-fold to > 220MW (including JV Co capacity) across Singapore, Thailand, and Indonesia in the next 3-5 years. It is also looking for suitable partners to expand into other ASEAN countries (e.g. Malaysia, Vietnam). It expects healthy EBITDA margin of ~50%, even outside of Singapore.
  • Reiterate ADD and target price of S$3.20 for SingTel, our top Singapore telco pick.

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

FOONG Choong Chen CGS-CIMB Research | Sherman LAM Hsien Jin CGS-CIMB Research | 2022-09-01
SGX Stock Analyst Report ADD MAINTAIN ADD 3.200 SAME 3.200

Read also CGS-CIMB's most recent report:
2022-11-10 SingTel - Special Dividend Makes Up For Earnings Miss

Target prices by 4 other brokers at SingTel Target Prices.
Listing of broker reports at SingTel Analyst Report.

Relevant links:
SingTel Share Price History,
SingTel Announcements,
SingTel Dividends & Corp Actions,
SingTel News Articles


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