SingTel – Maybank Kim Eng

A more exciting year ahead

  • SingTel’s Investor Day 2014 affirms our view that growth will restart this year. Reiterate BUY, TP SGD4.35.
  • 82% of our SOTP valuation is expected to record growth in FY3/15E, up from just 34% in FY3/14.
  • Digital investments starting to bear results, auguring well for the group. Dividend is expected to stay intact.

 

Investor Day affirms positive view

SingTel held its annual Investor Day last week. Following a whole day of meetings with all their operating companies, we walked away feeling reassured. Maintain BUY with a SOTP TP of SGD4.35.

The right ingredients are falling in place

By our estimates, 82% of SingTel’s SOTP valuation will be in growth mode this year vs just 34% a year before. This will be driven by: 1) Singapore whose growth will be driven by the adoption of 4G and the monetisation of Pay TV, and 2) all associates, except AIS, are expected to perform well on the back of rising data usage amid benign conditions. With regional currencies expected to be more stable, growth at associates, especially Bharti, should strengthen this year.

Elsewhere, Optus plans to aggressively regain market share, while the Digital Life initiatives, launched in 2012, are already enabling SingTel companies to better compete. While AIS may cut guidance but it is not large enough to affect the overall growth trajectory.

Digital Life investments will not harm dividends

Lastly, Group Digital Life CEO Allen Lew took pains to emphasise that (1) the SGD2b allocated for non-telco investments is in line with global benchmarks, (2) investee companies are already proving their worth in giving SingTel group companies an edge in the market place, and (3) financial discipline will be maintained and dividends will stay intact.

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