Brokers' take: Singtel results in line with expectations; RHB upgrades stock to 'buy'

SINGTEL'S third-quarter results were in line with expectations, said analysts on Thursday morning as they also said the stock is too cheap to ignore.

RHB Research upgraded its call on the stock from "neutral" to "buy", with a target price of S$4.10, noting that Singtel's share price has been sharply de-rated on broader market weakness and concerns over inflationary pressures in the US.

DBS Group maintained its "buy" call with a target price of S$4.30, pointing to the potential upside in the share price and the stock's yield of over 5 per cent.

Singtel on Thursday morning reported an 8.5 per cent fall in third-quarter net profit to S$890 million, mainly due to voice revenue declines, higher net finance expenses, and lower contributions from its regional associates.

Its group chief executive Chua Sock Koong told reporters that it wants to increase its interest in associates as it is confident in the longer term future of India, but is "not in a hurry" to do so.

Excluding associates, the group's third-quarter Ebitda (earnings before interest, taxes, depreciation and amortisation) rose 6 per cent from the previous year, versus a 4.5 per cent year-on-year growth for the nine-month results, reflecting strong momentum in the group's core business, said DBS analyst Sachin Mittal.

The stock's ratio of forecast enterprise value - a measure of a company's value including its market capitalisation and debt - over Ebitda is only 5.3 times, versus seven to 10 times for its local peers.

"(It) looks too cheap to us", he added.

RHB Research said that the stock has underperformed relative to domestic peers and the Straits Times Index so far this year.

It further noted that Singtel is trading at 10 times the 2018 forecast for its enterprise value-Ebitda ratio, below the five-year historical average of 12 times.

Its share price is also supported by the firm's diversified regional exposure and attractive 2018 forecast dividend yield of 6 per cent, it added.

"The stock remains our preferred pick for Singapore telco exposure."