Brokers’ take: Analysts positive on Singtel’s dividend payouts amid capital recycling, cost cuts
Vivienne Tay
SINGTEL ’S push for cost cuts and capital recycling could help raise dividend payouts in the coming years, analysts noted following the telco’s results release for the first-half 2023.
The group on Thursday (Nov 9) posted an 82.6 per cent rise in net profit for the first half ended Sep 30 to S$2.1 billion, supported by an exceptional gain from regional associate Telkomsel.
Most analysts have maintained their “buy” recommendations on Singtel, but remain measured when it comes to any potential share price appreciation.
In a report on Thursday, Maybank projected Singtel’s move to recycle up to S$6 billion in capital could result in S$1.1 billion in cash proceeds within three years.
This will come from selling 20 per cent of its regional data centre business to global investment firm KKR. It also expects S$800 million in net proceeds from the group’s Comcentre development in FY2025.
“This would leave Singtel with S$4 billion in capital recycling, likely from paring stakes in regional associates (valued at S$49 billion) in the medium term,” said Maybank analyst Kelvin Tan.
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These factors, coupled with a programme to cut indirect costs by 15 per cent within three years, could result in excess cash that can help Singtel reach the higher end of its dividend payout range in FY2024.
The group recently revised its dividend policy to raise the range to between 70 per cent and 90 per cent of underlying net profit, from between 60 per cent and 80 per cent previously.
Maybank has maintained its “buy” recommendation and target price of S$3.10 on the counter, implying a potential upside of 31.9 per cent from Singtel’s last trading price of S$2.35 as at 4.37 pm on Friday. Shares of Singtel were up 2.1 per cent or S$0.05 at the time.
Also positive on dividends, UOB Kay Hian has raised its dividend estimates for FY2024 to S$0.12 per share from S$0.115, following Singtel’s revision of its dividend policy payout range.
The adjustment could bring dividends for FY2024 to around S$0.13 per share, which implies an annualised dividend of around 6.5 per cent, the research team said on Friday in a report.
It continues to maintain “buy” on the counter, with an unchanged target price of S$3.15, which implies an FY2024 enterprise value-to-earnings before interest, taxes, depreciation and amortisation ratio of 15 times.
“In our view, Singtel remains an attractive play against elevated market volatility, underpinned by improving business fundamentals,” said UOBKH analysts Chong Lee Len and Llelleythan Tan.
In a separate report, RHB trimmed its target price on Singtel to S$3.20 from S$3.40 after reducing its estimates for FY2024-26 core earnings by between 5 per cent and 10 per cent. This is to factor in the weaker enterprise performance and foreign exchange adjustments.
The research team kept its “buy” call on the counter, noting that Singtel remains its preferred pick for exposure to Singapore telcos. It views the revised dividend payout range to be in line with the group’s strong capital management narrative.
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