Brokers' Take: Singtel upgraded to 'buy'

CITI Research upgraded telco Singtel to "buy" with a S$3.92 target price on Tuesday, citing attractive valuations.

"With price points correcting 20 per cent over the last six months even with its relatively firm earnings base, we find it to be oversold. Valuations are now touching one standard deviation below its five-year mean and yield spreads versus US Treasuries are positively trading at +0.6 standard deviation above mean," Citi wrote.

"Moreover, among the large-cap Singapore stocks, Singtel's yield stands out as second best only to Keppel and is likely most sustainable given its free cash flow yield and balance sheet position."

However, it said that Singtel's benchmark stock status renders it vulnerable to broader market sell-downs. Worsening competitive dynamics in Australia and potential unfavourable foreign-exchange trends could also serve to cap price upside, it added.

Singtel closed at S$3.55 a share on Tuesday, up three cents from the previous day, after hitting an intraday low of S$3.43.