Why are Singtel shares rising?
The telecommunications company’s stock price closed higher, following its latest results and a new divestment deal.
- Singapore Telecommunications Ltd (SGX: Z74) share price rallied 2.3% on Thursday (25 August 2022)
- The group reported a 41% growth in net profit in the first quarter
- It will also be selling S$2.25 billion worth of Bharti Airtel shares
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How did Singtel fare in the first quarter?
Singtel saw a 41% year-on-year (YoY) increase in net profit for the first quarter ended 30 June 2022.
This was due to improved operational performance and exceptional gains from Airtel and dilution of the group’s effective shareholding in Australia Tower Network, the group said.
Underlying net profit increased 11% YoY, while post-tax contributions from regional associates jumped 12% YoY with continued strong performance by Airtel.
The telco’s operating revenue and earnings before interest, tax, depreciation, and amortisation (EBITDA) were down 5.6% and 2.0% respectively due to the absence of contributions from national broadband network (NBN) migration and Amobee, as well as a 4% depreciation of the Australian Dollar.
The group also announced on 25 August 2022 that it has entered into a share purchase agreement to sell a 3.3% direct stake in regional associate Airtel to Bharti Telecom.
The sale, to occur any time before 23 November 2022, will unlock approximately S$2.25 billion as part of the Singtel Group’s capital recycling strategy.
Singtel stock price: what’s the latest forecast?
The blue-chip counter is up by nearly 15% year-to-date.
In terms of outlook, Singtel shares have a consensus rating of ‘outperform’ and an average price target of S$3.18, based on the latest SGX StockFacts data.
The price target equates to a 19.1% upside potential from its last traded price of S$2.67.
RHB’s equity research team reiterated a ‘buy’ rating and price target of S$3.55 following the group’s latest financial results and divestment announcement.
The analysts said Singtel’s first quarter results ‘came in light’ but earnings should pick up momentum in the second half on higher roaming revenue, positive impact from Optus’ repricing and sale of non-core assets.
‘We see a further improvement in roaming traffic and prepaid sales, from higher tourist arrivals alongside stronger enterprise contributions. Singtel remains our preferred telco pick on its positive earnings execution and the unlocking of latent value from asset monetisation exercises,’ they added.
Regarding Singtel’s capital recycling strategy, the analysts see the group’s loss-making cyber-security outfit, Trustwave, as the next in line to be monetised (for around S$700 million).
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