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Singtel's special dividend sweetens 1HFY2023 results

Singtel's special dividend is payable in two tranches: December 2022 and August 2023.

Singtel faced “minor speed bumps” in 1HFY2023 ended September, as patmi missed analysts’ expectations. That said, a special dividend has sweetened the latest set of results.

While analysts remain divided on Singtel’s fair value, four research houses were unanimous in their “buy” call on Singtel.

RHB Group Research analysts have trimmed Singtel’s target price to $3.30 from $3.55. The new target price — the highest among four houses mentioned here — represents a 26% upside. RHB’s target price could have been higher, if not for the cybersecurity hacks at Australian subsidiary Optus. As a result, RHB analysts brought Singtel’s ESG score down to 3.3 from 3.6.


Singtel reported earnings of $1.17 billion for its 1HFY2023 ended September, up 23% y-o-y, as it booked gains from the recent divestment of a 3.3% stake in Bharti, its associate in India. Excluding such one-offs, the telco’s underlying earnings would be up by just 2% y-o-y.

The telco declared a 4.6 cents interim dividend, implying a 76% payout ratio. Singtel also declared a special dividend of 5.0 cents, payable in two tranches of 2.5 cents each in December 2022 and August 2023.

Singtel booked a $142 million provision, or exceptional item, for the late-September cyber-attack on Optus together with $1 billion in goodwill impairment (non-cash) from macro headwinds.

Optus has restarted customer acquisition activities after suspending them earlier due to the incident, which saw personal data of 9.8 million customers compromised. “We have reviewed our benchmark ESG score to factor in the cyber-attack, which has negatively impacted Optus’ brand franchise. Overall, our ESG premium was reduced to 6% from 12% with a moderated score for the social pillar,” write RHB analysts in a Nov 11 note.

$3.15 emerges as consensus target price

Meanwhile, UOB Kay Hian Research, Maybank Securities and DBS Group Research all arrived at a $3.15 target price on Singtel. UOBKH upped its target price from $2.90, Maybank held steady and DBS slashed the figure from $3.24 previously.

Singtel’s regional associates’ pre-tax contribution grew by 10.6% y-o-y to $1,157 million, in line with DBS’s expectations. Analyst Sachin Mittal writes: “A stronger-than-expected Bharti’s contribution of $336 million (up 129% y-o-y) more than offsets weaker contributions from [Indonesia’s] Telkomsel ($455 million, down 4% y-o-y) and [Thailand’s] AIS ($139 million, down 13% y-o-y). Bharti benefits from higher data usage and tariff hikes in India.”

Mittal cuts Singtel’s forecasted FY2023/FY2024 earnings by 9%/10% on three risks: slowdown in Optus growth momentum, challenges in NCS and derivative-related investment loss. “We reduced the growth momentum in Optus due to short-term concerns stemming from the recent cyber-attack, and the weaker Australian dollar is expected to reduce the contribution to core ebitda of the group.”

Meanwhile, ongoing scaling activity in NCS will experience near-term challenges, prompting Mittal to cut Singapore core ebitda by 4%/9% during FY2023/FY2024.

Finance cost was noticeably high during 1HFY2023, up 46% y-o-y, resulting from a revaluation loss from a derivative as opposed to the revaluation gain achieved a year ago. The bulk of the loss has been absorbed during 1HFY2023, estimated at 80%, and the remainder is expected to be incurred during 2HFY2023, notes Mittal. “Hence, considering the aforementioned factors, we cut our FY2023/FY2024 earnings by 9%/10%.”

Conversely. UOBKH analysts Chong Lee Len and Llelleythan Tan cite Singtel’s ability to chase higher return on invested capital (ROIC) in the current macroenvironment for their optimism. “With a decent yield of 5.5% for FY2023, Singtel remains an attractive play against elevated market volatility, underpinned by improving near- to medium-term fundamentals.”

To Chong and Tan, key re-rating catalysts for Singtel include a successful monetisation of 5G, monetisation of data centres and/or NCS and market repair in Singapore and the resumption of regional roaming revenue.

As at 4.30pm, shares in Singtel are trading 2 cents higher, or 0.72% up, at $2.78.

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