Singtel's share price has rallied over 40% year-to-date, outperforming the Straits Times Index’s (STI) 14% gain. We attribute this outperformance to:
better-than-expected earnings;
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growth potential from data centres and artificial intelligence (AI) tailwinds and;
its defensiveness amid market volatility.
More room of growth.
Looking ahead, we remain positive and see further upside from:
Optus’ revenue and ROIC improvement driven by average revenue per user (ARPU) growth, margin gains and lower CAPEX intensity;
recovery in regional associates as industry mobile price repair progresses;
potential market consolidation in Singapore and growth in enterprise services;
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sustained dividend growth.
Capital recycling program remains on track
Singtel has set a mid-term capital recycling target of S$9b (S$4b has been realised), which management views as conservative with potential upside. This will include divestments of stakes in operating companies, regional associates (including Bharti), non-core assets, and infrastructure assets. Proceeds will be redeployed towards dividends, growth initiatives, and share buybacks.
Management is confident in sustaining its value realisation dividend programme comfortably over the medium term, likely through FY30. Meanwhile, the S$2b share buybacks programme has yet to commence, offering further upside potential.
Expanding DC capacity.
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Above is an excerpt from a report by OCBC Investment Research. Clients of OCBC Securities may be the first to access the full PDF report @ https://www.iocbc.com/.
