Analysts lift target prices for Singtel after STT GDC deal – with highest upside over 10%
Maybank, DBS maintain ‘buy’ while Morningstar keeps conservative view
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[SINGAPORE] At least two brokerages have raised their target prices for Singtel, following the telco’s move to acquire a stake in data centre operator ST Telemedia Global Data Centres (STT GDC) as part of a KKR-led consortium.
That would be the biggest data centre deal in South-east Asia on record, according to Reuters.
CGS International (CGSI) raised its target price to S$5.34 from S$5.20, while HSBC analysts lifted theirs to S$5.20 from S$5.15. Both research houses maintained “buy”, citing the long-term growth potential of the deal.
Shares of Singtel rose 1 per cent to close S$0.05 higher at S$4.91 on Wednesday (Feb 4) after the deal was announced, having run up 4.7 per cent the day before in anticipation of the transaction. It subsequently fell 3.3 per cent to be S$0.16 lower at S$4.75 as at the midday trading break on Thursday.
Singtel and private equity player KKR will acquire the remaining 82 per cent stake that they do not own from STT GDC’s parent company, ST Telemedia, for S$6.6 billion. Upon completion of the deal in the second half of 2026, Singtel and KKR will own stakes of 25 and 75 per cent, respectively, in STT GDC.
Singtel will fork out S$740 million in cash for the purchase over two tranches in 2026 and 2027, with a further S$400 million to S$500 million in equity contributions for capital expenditure commitments.
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The deal gives Singtel wider exposure to data centres across 12 markets across Europe and Asia, including Singapore, through STT GDC, which is valued at S$13.8 billion.
Growth and dividends
CGSI analyst Prem Jearajasingam noted that the deal provides “long-term growth opportunities” and increased his 2027 and 2028 core net profit estimates for Singtel by 1.3 and 1.7 per cent, respectively.
“With a significant war chest in the form of asset recycling potential... we do not see this acquisition as placing a strain on Singtel’s ability to delivering dividend growth,” said Jearajasingam.
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He added that Singtel’s 27.5 per cent stake in Bharti Airtel has the potential to net the Singapore telco S$12 billion, assuming it pares down its holding to match the Mittal family’s indirect stake. Singtel could thus deliver a 14.2 per cent compound annual growth rate in dividends per share from now until 2028.
HSBC analysts share this optimism, expecting earnings before interest and taxes to reach S$1.9 billion by the 2028 financial year – up from S$830 million in the first half of FY2026. They attribute this to mobile revenue growth at Optus, cost optimisation and the doubling of data centre capacity in Singapore to about 120 megawatts.
“Additionally, the company’s commitment to share buybacks of S$2 billion over three years should further support dividend growth and capital returns,” the analysts noted.
Broader view
Meanwhile, DBS and Maybank Investment Banking Group maintained their “buy” and target prices on Singtel following the announcement of the deal.
DBS maintained the highest target price of the pack at S$5.71. Analyst Sachin Mittal described the acquisition as adding a “long-term growth driver at a small cost”, and said the rating was “rather fair” for a high-growth data centre player.
He also noted that the deal would have a less than 1 per cent impact on near-term earnings per share, while significantly boosting Singtel’s growth trajectory in the data centre space over the next five years.
Macquarie likewise maintained its “outperform” rating and a S$5.29 target price. While the research house described the move as a “strategic acquisition at a fair price”, it remained neutral on the transaction itself, noting that upside will hinge on execution given the minimal earnings accretion.
Maybank kept its target price of S$5.08 unchanged, viewing the deal favourably for strengthening Singtel’s artificial intelligence and GPU-as-a-Service value proposition. While the research house estimates the transaction could be 1 to 2 per cent dilutive to earnings and slightly increase leverage, it noted that Singtel’s capital management initiatives remain intact.
Maybank also highlighted that the 27 per cent holding company discount currently applied to Singtel is high compared with pre-Covid levels of 10 to 15 per cent.
Taking a more conservative stance, Morningstar retained its fair value estimate of S$4.36 – well below the stock’s last traded price – noting that Singtel appears expensive relative to global peers.
Senior equity analyst Dan Baker views the acquisition as likely being “mildly EPS (earnings per share) dilutive” for several years due to the net losses associated with the sector’s rapid growth. However, he acknowledged the deal looks inexpensive on a price-to-book basis and that Singtel’s premium valuation is partly justified by its high-growth assets.
According to Bloomberg data, Singtel currently has 16 “buy” and two “hold” ratings.
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