SingTel - DBS Research 2024-01-26: 2 Reasons To Expect A Rally, Finally

• SingTel (SGX:Z74) is implementing a two-pronged approach to boost operating profits and ROIC.
  1. ROIC is generally difficult to improve unless there is a cut in opex and capex. The aggressive cost-cutting of S$200m each year over FY23-26F is one key driver.
  2. - Read this at SGinvestors.io -

Singtel’s core operating profit (EBIT) likely to see 6%-8% annual growth over FY23-26F

• We project SingTel would record group core operating profit (EBIT), which excludes associates’ contributions, of S$584m in 2H24F, up 10% y-o-y, flattish h-o-h, due to the following reasons:

1. Optus is to benefit from tariff hikes and backend-loaded cost-savings, which would potentially offset the network outage impact.

• - Read this at SGinvestors.io -
• Electricity costs in Australia rose by 46% in 1H24, which impacted Optus’s EBIT in 1H24, leading to aggressive tariff hikes by Optus in mid-2023. Backend-loaded cost-savings at Optus after it right-sized its enterprise business unit should help it achieve sequentially stable EBIT in 2HFY24F, in our estimates.
• Out of the S$200m cost-savings targeted by the group for FY24F, we expect S$120-130m to be realised in 2H24F, largely at Optus.

2. NCS growth to continue, with most of the contract re-repricing done and wage inflation on a decline.

• Read more at SGinvestors.io.

Sachin MITTAL DBS Group Research | https://www.dbs.com/insightsdirect/ 2024-01-26 SGinvestors.io

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