When will Singtel shares start to recover?

• Singapore Telecommunications Ltd (SGX: Z74) share price has declined 2.2% in the last two sessions
• The telco announced the issuance of S$1 billion worth of 3.3% Perpetual Securities last Friday (16 May 2021)
• RHB and UOB analysts recently reiterated ‘buy’ ratings on Singtel, citing its stock among their top picks
• Interested to trade Singtel shares at just a fraction of the cost? Open an account with us today to get started.

Singtel stock price: what’s the update?

Singtel shares have fallen 2.2% since announcing the issuance of S$1 billion worth of subordinated Perpetual Securities.

The Perpetual Securities were drawn down under Singtel Group Treasury Pte Ltd’s existing S$10 billion Euro Medium Term Note Programme guaranteed by Singtel. The securities have an initial rate of distribution of 3.30 per cent per annum.

This announcement is in connection with an earlier news release that SGT had priced S$1 billion of subordinated Perpetual Securities on 07 April 2021, guaranteed by Singtel.

Additionally, the telco said that an advanced tax ruling has been obtained from the Inland Revenue Authority of Singapore for the perpetual securities to be regarded as ‘debt securities’.

This means that the Perpetual Securities ‘should qualify as QDS (qualifying debt securities) and holders of the Perpetual Securities should therefore be able to enjoy the tax exemptions and concessions available under the QDS scheme,’ the group stated in a bourse filing dated 16 July 2021.

What are analysts’ latest ratings and price targets?

Singapore’s largest telco’s stocks have been on a downward spiral since mid-May 2021, with its share price having fallen nearly 9%, amid a worsening pandemic.

Year to date, the blue-chip counter is now down by 3.03%. The latest analyst sentiments published by SGX StockFacts show a consensus rating of ‘outperform’ and an average 12-month target price of S$2.90 on the stock.

The target price presents a 29.5% upside potential from Singtel’s last traded price of S$2.24 on 01 July 2021.

RHB’s equity research team maintained a ‘buy’ recommendation on 13 July, while lowering target price to S$3 from S$3.30 previously.

The analysts said Singtel was among their preferred telco picks, citing the company’s potential to ‘further scale-up digital revenue streams given the structural shift in revenue and enterprise digitalisation efforts’.

This was based on Singtel’s latest annual report, in which Singtel’s chairman Lee Theng Kiat and chief executive Yuen Kuan Moon had indicated the company’s plans to ramp up its digitalisation efforts in view of ‘amplifying trends that are redefining the basis for success for industry’.

The analysts also expect a year-on-year recovery in mobile revenue starting from 1Q FY2022, which they believe could be a catalyst for share price to be re-rated upwards.

Nevertheless, the research team reduced its FY2022 to FY2023 core earnings estimates by two percentage points to 11% from 13% previously.

Meanwhile, UOB analysts reiterated a ‘buy’ rating on Singtel alongside a target price of S$2.84 on 05 July 2021, calling the ‘undervalued’ stock its ‘top pick’.

UOB believes that Singtel will ‘benefit from the reopening of economies in the region and positive newsflow on the stake sale of Optus tower, amongst others’.

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