Maybank KE sees further upside for Singtel as recovery is underway

Singapore

MAYBANK Kim Eng sees further upside on telco Singtel as recovery is underway, driven by a projected upswing from Indian associate Bharti Airtel in fiscal 2022.

The Indian telecommunications sector is undergoing a structural shift and is benefiting from a surge in data usage, the research team said. Bharti Airtel, in particular, has outpaced its peers across all operating metrics, gaining market share from 2G to 4G conversion.

Bharti Airtel drives 18 per cent of Singtel's associates earnings in Maybank Kim Eng's fiscal 2022 forecast.

As a whole, the research house said there is "deep value" in Singtel's stock, which is backed by a 5.1 per cent yield. The research team maintained its "buy" call on the stock and its sum-of-the-parts-based target price of S$2.88.

Shares of Singtel closed S$0.02 or 0.8 per cent higher at S$2.47 on Wednesday, with 48.6 million shares changing hands. The counter was the top traded by value on the day.

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A breakout above S$2.60 could validate a reversal and start a new uptrend towards S$2.90 to S$3, Maybank KE said.

"The market is ascribing almost zero value to Singtel's core business in Singapore and Australia," the brokerage said. It estimates that a further monetisation of Singtel's assets could unlock an additional S$0.40 per share. Assets include Optus Tower, Amobee and Trustwave.

Meanwhile, in Thailand, the scope for a higher dividend payout ratio provides a dividend upside for Singtel, Maybank KE noted.