Can Singtel recover to S$2.90 a share?

Although Singtel’s FY2021 earnings beat industry forecasts, some analysts prefer to err on the safe side for now, lowering their target prices.

  • Singapore Telecommunications Ltd (SGX: Z74) shares are trading at S$2.42 apiece
  • CIMB analysts recently lowered their price target on the blue-chip stock to S$2.90
  • The analysts still kept a ‘buy’ rating, stating that the telco’s dividend guidance for FY2022 was within their expectations
  • Singtel’s planned strategic reset also ‘offers hope’ to investors
  • Buy and sell Singtel stocks with an IG account

CIMB cuts Singtel price estimate to S$2.90

CIMB analysts recently lowered their fair value estimate on the Singtel stock.

Although the analysts reiterated a ‘buy’ rating on the telco, they also reduced their target price slightly to S$2.90 from S$3.10 previously, after cutting their FY2022 to FY2023 core earnings per share on expected lower earnings from Singapore, Bharti and Telkomsel.

Nevertheless, they noted that Singtel’s FY2021 core net profit, which fell by 22% year-on-year, still ‘slightly beat’ their forecast by 8%.

The board also recommended a final ordinary dividend per share (DPS) of S$0.024, bringing the total ordinary DPS for the year to S$0.075. FY2020’s total DPS was S$0.1225.

Dividend yield equated to 3.1% (based on the latest stock price), coming in below analysts’ predictions of a dividend yield of 5% on a forecasted total DPS of S$0.115 for FY2021.

However, the telco’s guidance for a 60% to 80% dividend payout ratio in FY2022 was within the analysts’ expectations.

‘Singtel’s current share price implies an FY3/22F EV/EBITDA of just 4.5 times for Singtel Singapore and Optus, with decent FY22-24F yields of 3.9-5.9% per annum,’ the analysts concluded.

Singtel’s strategic reset ‘offers hope’

Elsewhere, the group also expects dividends from the regional associates to be approximately S$1.3 billion for FY2022, and its capital expenditure, including 5G networks, to be around S$2.4 billion, comprising A$1.5 billion for Optus and S$800 million for the rest of the group.

The group will also aim to ‘maintain a strong balance sheet through a more active capital management programme’.

Yuen Kuan Moon, Singtel Group CEO, further noted that in light of NCS and its data centre services benefitting from enterprises rushing to digitalise and transform their businesses, the group will be capitalising on this trend through a strategic reset.

CIMB analysts said the new strategic direction ‘offers hope’, as it could unlock the value of its quality infrastructure assets, which are believed to be worth around S$4 billion to S$6 billion.

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