Singtel to divest Amobee for US$239m, expects to net US$197m

SINGTEL is divesting Amobee to the UK’s Tremor International for an enterprise valuation of US$239 million, above the US media and advertising subsidiary’s carrying value of US$160 million.

The transaction, which excludes Amobee’s e-mail solutions business, will realise some US$197 million in net proceeds and is expected to complete by September this year.

In a bourse filing on Tuesday, Singtel said the transaction is in line with the group’s strategic reset to sharpen its business focus and recycle assets and capital into growth areas with higher returns.

Amobee was reclassified as a subsidiary held for sale as at end-March 2022, with a total asset value of S$449.8 million and a net asset value of S$216.6 million. 

“This divestment reflects our resolve in executing our strategic reset. We are actively reshaping our portfolio to ensure optimal allocation of resources towards new growth drivers, as well as to improve shareholder value,” said Singtel chief executive Yuen Kuan Moon.

News of the potential sale first emerged on Jun 20 when British news organisation Sky News reported that Tremor was in discussions with Singtel to purchase Amobee for £165 million (S$280.4 million).

Analysts viewed the deal as both earnings- and value-accretive for Singtel, which posted pre-tax losses of S$70.2 million and S$81.9 million in FY2022 and FY2021, respectively.

DBS analyst Sachin Mittal said in a note on Tuesday that the net proceeds from the deal are in line with his expectations and maintained his buy rating on Singtel with an unchanged target price of S$3.24.

“Singtel’s earnings compound annual growth rate (CAGR) is higher than most blue-chip stocks in Singapore and similar to earnings CAGR offered by Singapore banks but less reliant on economy,” he said.

He further noted that Singtel’s cybersecurity arm, Trustwave, will be similarly classified as “held for sale”, as Amobee once was, as talks for its sale are at an advanced stage. The subsidiary incurred an even bigger earnings before interest and tax loss of S$145.3 million in FY2022.

Nitin Soni, senior director from Fitch Ratings Asia-Pacific technology, media and telecom team, also sees other capital-raising options for Singtel, such as its minority stake in Singapore Post and fibre network infrastructure owner NetLink Trust, as well as other digital assets.

“Fitch expects Singtel’s net debt to earnings before interest, tax, depreciation and amortisation may approach 1.9 times as it seeks to expand its information, communication and technology (ICT) arm, NCS, into new markets via mergers and acquisitions. However, we believe Singtel is committed to its current ratings of A/Stable and will manage its shareholder return policy,” he said.

With the additional capital, CGS-CIMB analyst Foong Choong Cheng expects Singtel to reinvest the sale proceeds into new growth areas such as NCS’s business footprint in the region, its data centres in Singapore, Thailand and Indonesia as well as its regional digital banking platform in Singapore, Malaysia and Indonesia.

Citi analyst Arthur Pineda said that he is raising his FY2023 and FY2024 recurring estimates for Singtel by 1 to 2 per cent and raising its target price by 2 per cent to S$3.30 to reflect the removal of Amobee’s losses from the telco’s earnings.

Shares of Singtel ended Monday S$0.03 or 1.1 per cent lower at S$2.62.