Singtel opens 9% higher after Grab partnership wins digital bank licence

• Singtel shares opened nearly 9% higher on Monday (07 December)
• The stock then rose to an intraday peak of S$2.58 five minutes into trading
• This follows the telco’s digital banking licence win last Friday, as part of its partnership with lifestyle app Grab

Singtel share price: What’s the update?

Singapore Telecommunications Ltd (Singtel) shares opened 8.6% higher on Monday (07 December 2020), after its consortium with Grab was awarded a digital full bank licence.

The telco’s shares opened at a five-month high of S$2.53, rising to a peak of S$2.58 five minutes into trading (representing a 10.7% increase from the previous close), before settling at S$2.48 a share by mid-day.

Singtel-Grab received one of two digital full bank licences announced by the Monetary Authority of Singapore on Friday (04 December). The other was awarded to tech giant and New York Stock Exchange-listed Sea Limited.

Hiring already underway at Singtel-Grab consortium

The Singtel-Grab consortium says it will focus on serving consumers and small businesses, beginning with young professionals, managers, executives and technicians (PMETs), gig workers with flexible incomes, and micro-SMEs who face limited access to financing.

Grab and Singtel will aim to enable these ‘underserved groups to easily access transparent financial services that are embedded in their everyday activities’.

Grab and Singtel’s priority is to ‘create the most seamless and secure digital banking experience in Singapore’. Operations will reportedly begin in 2022.

To achieve this, the consortium says it has already started assembling a team of experts with backgrounds in banking, fintech and technology. Key roles overseeing product, data, cybersecurity and technology - around 10% to 15% of the 200 open positions - have already been filled.

What are brokers’ latest predictions for Singtel?

The stock was rated a ‘buy’ by 15 analysts and a ‘hold’ by another four, with an average target price of about S$2.83 as at 02 December.

Maybank Kim Eng analysts reinitiated coverage on Singtel on Sunday (06 December) with ‘buy’ and a S$2.88 price target, citing that they prefer Singtel for its ‘proxy to digital banking expansion’ and ‘improving volumes and margins from rising ARPUs and 5G’.

The brokerage also noted previously that at the stock’s current cheap valuations, the market is ascribing almost zero value to the company’s core businesses.

Meanwhile, CIMB was more optimistic with its target price of S$3.10, stating that the licence win ‘represents an expansion into a potentially profitable business over the medium to long term’.

However, the analysts do not see the Grab partnership having a ‘major impact’ on Singtel’s net profit in the next three financial years.

Older ratings included Morningstar Inc, which recommended ‘hold’ with a S$2.20 target on Wednesday (02 December). More aggressive targets came from Credit Suisse at S$3.35 and Macquarie at S$3.21, with both giving an ‘outperform’ call.

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