SingTel - Maybank Research 2024-05-24: Positive Surprises: Firm Core Growth, Higher Dividends ~ BUY

• We raise our SOTP-based SingTel target price by 5% to S$3.24 and reiterate BUY, targeting a total return of 40%.

FY24 review

• SingTel (SGX:Z74)’s FY24 results and guidance surprised us positively on multiple fronts:
  1. - Read this at SGinvestors.io -
  2. a firm core business growth outlook; and
  3. falling core capex intensity.

Durability check: parsing growth & dividend outlook

• SingTel is guiding for a high single to a low double-digit FY25 core EBIT growth. The outlook for mobile remains firm, helped by competitive rationality in Australia and still legs for roaming recovery in Singapore (7% EBIT lift).
• - Read this at SGinvestors.io -
• SingTel has guided for S$0.03 to S$0.06 per year in dividend from value realisation over the medium term on top of its regular dividends.
• While SingTel’s FCF is tracking below its earnings (mainly due to absence of meaningful Bharti dividends), we think SingTel can comfortably fill the gap, helped by:
  1. S$2b of still-unutilized capital from the past capital recycling; and
  2. a targeted S$6b of fresh capital-recycling initiatives over the medium term.
• We think a part of the fresh capital recycling could come from further Bharti stake sale in lieu of meaningful dividends from Bharti. Elevated data centre investments would be funded by proceeds from its 20% data centre stake divestment, while spectrum payments of S$1.6b can be partly funded by Comcenter redevelopment proceeds.

Optus capex has peaked (even with TPG partnership)

• Read more at SGinvestors.io.

Hussaini Saifee Maybank Research | https://www.maybank-ke.com.sg/ 2024-05-24 SGinvestors.io

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