Why are Singtel shares a 'buy' now?

• Singtel (SGX: Z74) share price retreats over 1% on Monday (25 October)
• The company’s subsidiary Trustwave has sold off its payment card compliance, SecureTrust, for US$80 million
• 17 out of 19 analysts currently rate the telco stock a ‘buy’
• Keen to trade Singtel shares? Open an account with us to short or long the stock now.

Singtel’s Trustwave sells off SecureTrust

Singtel’s cyber security arm Trustwave has divested SecureTrust, its payment card compliance business, to Sysnet Global Solutions, a provider of cyber security and compliance solutions, for a cash consideration of US$80 million.

The sale comes as part of Singtel’s strategic review of its digital businesses announced in May 2021 to optimise the telco’s resource allocation and reposition these assets for growth.

Singtel Group CEO Mr Yuen Kuan Moon said that the divestment is the ‘first step’ following an extensive review of the Trustwave business.

‘With enterprises pivoting fast to hybrid, multi-cloud environments, the cyber threat landscape has changed considerably and the need for a focused set of services centered on managed threat detection and response has grown,’ said Mr Yuen.

‘Trustwave can now better meet those needs by concentrating on its core offerings of managed detection and response, managed security services, and consulting services to help businesses reduce complexity and cyber risk in their environments,’ he added.

In addition to the divestment, certain Trustwave assets that are complementary to the Group’s core telecommunications and system integration business in Asia Pacific will move into Singtel, NCS and Optus.

The integration of these assets will ensure closer alignment with the respective unit’s core products and services. This will enable each local business to focus on core competencies and technology and process innovation, and stay closer to their respective customers.

With this realignment, Singtel’s cyber security business in Asia Pacific will be one of the largest with a revenue of more than S$350 million.

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Singtel stock price analysis: the latest

Shares of Singapore’s biggest telecommunications provider were 1.2% lower at S$2.54 as at 15:55 SGT on Monday.

Out of 19 analysts, 17 recently recommended ‘buy’ on Singtel shares, two suggested ‘hold’, and none gave ‘sell’ calls, Bloomberg data showed. Their average target price was S$2.97, implying potential upside of 16.5% based on the stock’s latest price.

CIMB’s research team, which rated Singtel an ‘add’ with a S$2.90 target price, recently highlighted that digital banking may be a value creator for Singtel in the long run, even though it may not be highly profitable in the first five years.

Meanwhile, UOB analysts added Singtel to its ‘Alpha Picks’ list, stating that they like the group’s Australia tower asset monetisation plans. They maintained a ‘buy’ call on the stock alongside a target price of S$2.75.

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