Singtel’s share price recovers 27% as dividend outlook improves

A rumoured sale of property assets by Singtel’s Australian subsidiary Optus has led to analysts raising their dividend predictions for the company.

Singapore Telecommunications (Singtel) shares are currently trading along a six-week apex, with share price at least 27% above the low of 23 March 2020.

Last Tuesday (14 April), the telco group saw its stocks hit S$2.85 per share – its highest level since 11 March.

At the time of writing – at 16:30 SGT on Monday 20 April 2020, Singtel shares are trading at S$2.78 apiece.

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Sale of Australian mobile towers by Optus

Since our last update on Singtel, the company has made several new announcements, including a planned sale of over A$2 billion (S$1.8 billion) in property assets in Australia.

On 03 April, the Australian Financial Review reported that the group’s Australian subsidiary Optus is in the process of auctioning off its portfolio of mobile phone towers, for which it will lease back from the purchaser to continue operations. According to the news site, the telco has also mandated Bank of America to underwrite the potential sale and leaseback agreement.

Singtel issued the following response shortly after: ‘Singtel regularly reviews its options to optimise its assets and operating model. Singtel wishes to emphasise that there is no certainty or assurance that any transaction will occur.’

It added that it will ‘make further announcements as appropriate…if and when there are any material developments’.

Read also: Top 5 recovering Singapore share prices amid coronavirus pandemic

Singtel’s shareholder dividends could revert to 2019 levels

Analysts view the sale of the mobile phone towers as a positive move for the telecommunications provider.

Citibank analysts had written in a research note that the rumoured sale will shore up Singtel’s balance sheet, which could potentially provide a boost to shareholder dividends.

‘If the assets are indeed sold, we see room for dividend upside,’ the analysts wrote, adding that the positive cash flow could allow the group to meet its 2019 dividend per share payout in the current 2021 financial year.

For FY2019, shareholders received a dividend payment of S$0.175 per share for the year ended 31 March 2019. Dividends for FY2020 were lower at S$0.068 a share.

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Liquidators appointed for Singtel’s winding up of HOOQ Digital

Separately, Singtel had also on 13 April appointed liquidators for the ongoing creditors’ voluntary liquidation of video streaming service HOOQ Digital, a joint venture company in which Singtel has an indirect 76.5% effective interest.

The closing of HOOQ ‘is not expected to have any material impact on the net tangible assets or earnings per share of Singtel’, the group had stated in the original Singapore Exchange filing. However, DBS researchers estimated that the liquidation will boost Singtel’s bottom line by S$60 million to S$65 million a year for the 2021 and 2022 financial years.

At the conclusion of its 2019 financial year ended 31 March 2019, HOOQ had accumulated US$70.8 million in liabilities, according to the Accounting and Corporate Regulatory Authority. While revenue increased over 100% last year, pre-tax losses grew from US$56.6 million in 2018 to US$62.5 million in 2019.

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