Singapore Telecommunications (Singtel) is set to capitalise on several growth opportunities, according to a recent report by Maybank Research. The telecommunications giant is benefiting from a favourable operating environment in Australia, market consolidation in Singapore, and burgeoning opportunities in artificial intelligence (AI) and digital infrastructure. These factors are expected to drive Singtel’s continued success despite foreign exchange challenges.
Singtel’s Australian subsidiary, Optus, is experiencing a multi-faceted recovery. The company is seeing rational competition in the market, with broad-based price hikes and a focus on improving return on invested capital. Optus is also optimising its capital expenditure through a partnership with TPG, which is expected to enhance its earnings before interest and taxes (EBIT) by 5-20%. The report anticipates Optus’ mobile revenues, EBIT, and free cash flow to grow significantly over the next few years.
In Singapore, the telecommunications market is undergoing consolidation, which is expected to rationalise competition and potentially lead to a rebound in industry revenue growth. This environment is likely to benefit incumbents like Singtel, as pricing discipline returns to the market.
Singtel’s digital infrastructure arm, Nxera, is rapidly expanding its data centre capacity across Southeast Asia. With significant pre-sales in its upcoming facilities in Singapore and Thailand, and plans to enter Japan and Korea, Nxera is positioned to capture substantial growth in the region. The management forecasts a compound annual growth rate of over 20% in data centre revenue through 2028.
The report raises Singtel’s target price by 11% to $4.75, reflecting a lower weighted average cost of capital and improved earnings prospects. The recommendation to buy Singtel shares is reiterated, highlighting the company’s strong strategic positioning in the evolving telecommunications landscape.
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