Brokers’ take: Analysts raise Singtel target on upbeat dividend, growth outlook

ANALYSTS have raised their target prices on Singtel after it put out guidance for higher dividends as a result of asset-recycling initiatives.

There is also optimism over the telco’s growth prospects amid a better outlook on its regional associates, said multiple research houses in separate reports.

To recap, Singtel announced on Thursday (May 23) that it would embark on Singtel28, a growth plan that would recycle capital towards the company’s growth areas and raise dividends.

The announcement came after the board proposed a new value realisation dividend of S$0.038 per share, on top of a core dividend of S$0.06 per share. This takes the final dividend for the full year to S$0.098 per share.

DBS Group Research was positively surprised by the proposed value realisation dividend. It noted that the move indicated that divestment would continue and that shareholders would benefit from them.

“Singtel’s guidance on dividends and core Ebit (earnings before interest and tax) growth is quite positive,” DBS noted.

It has raised its target price on the counter to S$3.50 from S$3.27, implying a potential 44.6 per cent upside from the counter’s last trading price of S$2.42 as at the midday trading break. Shares of Singtel were up 0.4 per cent at the time.

Separately, HSBC Global Research raised its target price on Singtel to S$3 from S$2.90, implying a potential upside of 24 per cent.

HSBC expects dividends and profits to rise as Singtel’s core business grows, driven by cost optimisation and growth at NCS and the data centres. The bank’s research team also expects average revenue per user at Singtel’s regional associates to improve across markets.

HSBC is projecting a compound annual growth rate of 7 per cent for Singtel’s earnings before interest and taxes for Singtel’s FY2024 to FY2027. It believes Singtel’s dividend per share will rise 9 per cent year on year to S$0.164 in FY2025, and 8.5 per cent to S$0.178 on year in FY2026.

RHB raised its target price to S$3.25 from S$3.15, implying a potential upside of 34.3 per cent. It also showed optimism over Singtel’s sharpened narrative on earnings delivery and commitment to surplus cash being returned.

The research team has raised its core earnings estimates for FY2025-26 by 2 to 4 per cent, after rolling forward its valuation and introducing its FY2027 estimates.

Maybank, meanwhile, increased its target price to S$3.24 from S$3.10. It said some of the fresh capital recycling could come from an additional stake sale in Bharti in lieu of meaningful dividends from the Indian associate.

All four research houses have a “buy” call on the Singapore telco.

For the second half ended Mar 31, 2024, Singtel sank into the red with a net loss of S$1.3 billion, from a net profit of S$1.1 billion in the same period the year before.

This was mainly due to a marked increase in exceptional losses, which included S$3.1 billion in non-cash impairment charges. In the same period last year, the group recorded a net exceptional gain.

Singtel said that the S$2.5 billion net exceptional loss for the six-month period was mainly due to non-cash impairment charges on the goodwill of its Asia-Pacific cybersecurity business, Optus and NCS Australia.

The exceptional loss also included goodwill on Optus Enterprise’s network assets and a share of “significant fair-value losses” at Airtel Africa from the revaluation of US dollar liabilities and derivatives, due mainly to the devaluation of the Nigerian naira.