Potential £165m sale of Amobee to improve Singtel’s profitability: analysts

SINGTEL is reportedly in talks to sell its advertising technology unit Amobee in a deal that analysts said should lead to an improvement in the telco's profitability.

Tremor International, a UK-listed advertising technology company, is said to be in talks with mainboard-listed Singtel to purchase Amobee for £165 million (S$280.4 million), according to a Sky News report on Monday (Jun 20).

Sources suggested the deal could be closed “in the next fortnight”.

Analysts said the deal would be both earnings- and value-accretive for Singtel.

As at Mar 31, 2022, Singtel had reclassified Amobee as a subsidiary held for sale, with total asset value of S$449.8 million and a net asset value of S$216.6 million.

The company has posted pre-tax losses of S$70.2 million and S$81.9 million in FY2022 and FY2021, respectively.

Morningstar analyst Dan Baker said that although Singtel had tried to diversify its business through Amobee, as have many other cash-rich telcos in the world, Amobee has “not performed as well as expected”.

Over the years, he noted, Amobee acquired other businesses: data analytics company Turn for US$310 million, mobile ad company Adconion for US$235 million and advertising tech startup Kontera for US$150 million.

But the value of Amobee was written down in FY2020, FY2021 and FY2022 by S$195 million, S$589 million and S$310 million, respectively.

DBS analyst Sachin Mittal called the acquisition of US-based Amobee for US$321 million in 2012 a mistake, as Singtel never had a presence in the US to begin with.

“Whether it’s for Trustwave in the US, or Amobee in the US, Singtel doesn’t have any influence or associates there. There was no synergy to be extracted,” he said.

Nevertheless, if the divestment goes through at £165 million, Mittal said it would be considered a good price for a loss-making business, judging by Amobee’s carrying value and the weakening of tech companies’ valuations in the global market.

“In the case of over-the-top arm Hooq Digital, which liquidated in March 2020, Singtel had to incur liquidation-related costs,” he noted.

He added that cybersecurity business Trustwave and the telco’s fibre optic assets in Australia could be next in Singtel’s divestment pipeline as it seeks to meet its S$3 billion capital divestment target after its strategic reset announced in 2021.

Citi analysts Arthur Pineda and Luis Hilado said in a report on Tuesday that proceeds from the sale of the business could be recycled into other initiatives, such as its participation in the capital raising of associate Globe Telecom.

Globe Telecom, Singtel’s associate in the Philippines, is raising 32 billion pesos (S$823.4 million) through a rights issue from its shareholders.

In addition, Citi noted that while the divestment would likely have a marginal positive impact on net earnings and value accretion, it would still be a “step in the right direction in enhancing value”, they said.

Shares of Singtel traded at S$2.52 as at 3.37 pm on Wednesday, down 1.2 per cent or S$0.03.