Why Singtel is among OCBC, DBS analysts’ top picks for 2021
Singapore’s largest telecommunications provider is set to benefit from the anticipated economic recovery this year, say OCBC and DBS analysts.
- Singtel’s (SGX: Z74) share price ascended over 4% on Thursday (07 January)
- The telco was among the ten most actively traded stocks on the Singapore bourse
- Singtel unveiled a new organisation structure aimed at maximising digital growth last week
- OCBC and DBS analysts have named Singtel among their top equity picks for 2021, citing the telco’s anticipated recovery as a key reason
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Why did Singtel’s share price rise 4%?
Singtel shares climbed as much as 4.4% to S$2.40 on Thursday (07 January 2021) following the US Democratic Party’s win in the Georgia Senate runoff elections.
The group was also among the ten most active counters on the Singapore Exchange (SGX) on the day, experiencing a trade volume of over 43 million.
The Democrats’ win on Wednesday (06 January), which solidified the party’s control of the Congress and President-elect Joe Biden’s legislative agenda, helped to boost stock markets across Asia in early trading.
The Straits Times Index, Singapore’s blue-chip benchmark, was up some 1.56% to 2,907 as at 14:25 SGT.
What are analysts’ latest views on Singtel?
In terms of share price outlook, the Singtel stock has an average rating of ‘outperform’ and 12-month target price of S$2.925, according to SGX StockFacts.
The average target price represents an upside of 21.9% from the last traded price.
The latest rating came from OCBC’s head of research Carmen Lee on 17 December 2020. She named Singtel as one of ‘preferred stock picks’, giving the stock a target price of S$2.85 a share.
In her report, Lee posited that the recovery theme will be a key focus in 2021, with Singapore having entered Phase 3 on 28 December 2020 and favourable vaccine news lifting market optimism.
However, while selective growth stocks (such as US tech) continue to have potential, she believes that Singapore’s cyclical-heavy stocks - including Singtel - are well positioned to benefit from the recovery theme, and ‘also to narrow the gap between growth and value stocks in the months ahead as economic activities resume gradually’.
Meanwhile, DBS analyst Sachin Mittal reiterated a ‘buy’ rating and target price of S$2.75 on 11 December 2020, calling the stock a ‘top pick’.
Mittal anticipates that Singtel will achieve a 17.2% year-on-year earnings per share in 2021, while also resuming earnings growth in the next three financial years (FY2021 to FY2023) after a four-year gap.
In light of that, he expects Singtel, which has been paying out almost 100% of its free cash flow as dividends to its shareholders in recent years, to offer a dividend yield of 4.8%.
New Singtel organisation structure
Last Thursday (31 December 2020), the group announced a new organisation structure effective from 01 January 2021, so as to ‘capture new digital growth’.
Singtel said it would create a new arm under its existing Group Enterprise division dedicated to driving 5G enterprise business deals across the region.
In addition, Singtel subsidiary NCS, the largest ICT services provider in Southeast Asia, will report directly to the Group CEO to accelerate its expansion into Asia Pacific, with a special focus on Australia and China.
From 01 April 2021, the International Group, which currently manages Singtel’s portfolio of strategic telecom investments, will also be brought under the Group Chief Financial Officer office.
Finally, the Group Strategy and Business Development unit will be combined with the Group Digital Life (GDL) division to become the Strategic Portfolio unit. This will be helmed by Mr Samba Natarajan, currently CEO of GDL.
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