Singtel reviewing strategic options for its Thai units following bid for them
But prospective buyer's relatively low premium for asset with firm yield appears unlikely to succeed: analysts
Singapore
MAINBOARD-LISTED Singtel is reviewing its options in relation to Advanced Info Service (AIS), after an energy player launched a bid for the Thai telecoms operator and its controlling shareholder on Monday.
Calling its stakes in Intouch Holdings and AIS "strategic investments", Singtel said in a bourse filing that "we believe in the long-term outlook of the businesses", and will ensure that Intouch and AIS shareholders "get the full benefit of the intrinsic value".
While Singtel has not publicly committed to a decision so far, stock watchers seem unimpressed by the surprise conditional voluntary offer from Thai-listed power producer Gulf Energy Development.
Noting that AIS is a key part of Singtel's regional portfolio, Janice Chong, senior director of the Asia-Pacific technology, media, and telecom team at Fitch Ratings, told The Business Times that Singtel is unlikely to relinquish its interest "unless they are being offered a very good price".
Gulf Energy, which was founded by billionaire Sarath Ratanavadi, plans to buy all Intouch securities at 65 baht (S$2.77) each, or an 11 per cent premium to the last close. Such a price would value Intouch at more than 208.4 billion baht.
Gulf will also tender for AIS shares at 122.86 baht apiece, if it manages to secure at least 50 per cent of Intouch.
The cash transaction would be funded by a mix of working capital and credit facilities, Gulf has disclosed.
The private power producer also deals in renewables, gas, infrastructure and utilities. It said in its announcement to the Thai exchange that Intouch's telecom infrastructure-related investments have high growth potential and "will generate sustainable and long-term returns in terms of dividends" for Gulf.
Thai-listed Intouch was founded by ousted Thai premier Thaksin Shinawatra and used to be known as Shin Corp. It has a controlling stake of roughly 40 per cent in mobile operator AIS.
Singtel has a 21 per cent effective equity interest in Intouch and also owns about 23 per cent of AIS.
Singtel's Thai holdings currently contribute a fair share to its bottom line. AIS and Intouch jointly made up more than one-quarter of post-tax contributions from regional associates, at S$272 million for the nine months to Dec 31, 2020.
As such, Singtel may be loath to kill its golden goose, for what Citi telecom analyst Arthur Pineda called "the relatively low premium offered for a stock with a firm 5 per cent yield".
Fitch's Ms Chong also described AIS as "one of the better-performing associates" for Singtel, especially against other associates - such as Indonesia's Telkomsel and the Philippines' Globe - that have struggled with competition and other headwinds.
"If you look at Singtel, they have a lot of financial levers. They do not need to resort to selling associates, because associates give them very good dividends," she added in a phone call.
Similarly, Chong Lee Len, an analyst at UOB Kay Hian, told BT that she does not expect offers for Singtel's other assets in the near term, beyond the already-announced monetisation of Optus' towers Down Under.
UOBKH's Ms Chong said Singtel's response in its latest bourse filing showed a "very neutral stance", even as Joel Ng, head of research at KGI Securities, told BT over the phone: "The key point is the price. That's not much - I think they may have to negotiate for higher."
Separately, Mr Pineda doubted whether Gulf can successfully up its stake in Intouch from 19 per cent to a majority position, at this offer price.
And even if Gulf pips Singtel as AIS' single largest shareholder, "a strategic shareholding position isn't necessarily negative", he added in a report. "The presence of a strong local partner for AIS could evolve as a positive. Gulf also stands to benefit if it retains Singtel as a strategic investor."
In the meantime, though, KGI's Mr Ng believes that the Intouch offer could be a catalyst for Singtel's moribund share price.
The boost from speculative market action could last "probably for weeks, because I think there'll be talks in the meantime" before Singtel announces its decision, he added.
Singtel shares closed at S$2.60 on Monday, up 2 per cent or S$0.05.
Additional reporting by Ong Sing Yee
