What You Need to Know Ahead of Singtel's Earnings?

Despite experiencing a substantial 64% year-on-year decline in full-year earnings to $795 million, Singtel announced an increase in its annual dividend to 15 cents per share, marking the third consecutive year of dividend growth. This decision comes even after the company faced a net loss of $1.34 billion in the second half of FY2024 due to significant impairments.

However, excluding exceptional items, Singtel's underlying net profit actually rose by 10% year-on-year to $2.26 billion. Singtel attributes the lower revenue, which fell by 3.4% to $14.1 billion, to tough market conditions, yet remains committed to a new growth plan, Singtel28 (ST28), to enhance customer experiences and achieve sustained value for shareholders. The plan involves synergizing consumer and enterprise businesses, leveraging AI, scaling up NCS and Nxera, as well as expanding into new services such as GPU-as-a-Service.Singtel also plans to continue asset recycling, with a $6 billion monetisation target over the next three years, aiming to fund growth sustainably and illuminate the true value of its business segments.

Maybank Research maintains a BUY rating on Singtel with a price target of S$3.40 ahead of the Q1FY25 earnings report on 15 August. The firm expects SingTel to post a 7% year-over-year growth in underlying NPAT, driven by strong mobile revenue and improved NCS margins, leading to a projected 4% increase in EBITDA. Contributions from associates, including AIS and Globe, are anticipated to be robust, with NPAT growth of 18% and 27%, respectively. Despite slight forex weaknesses affecting Telkomsel's contributions, the overall impact is expected to be manageable. The analysts highlight potential dividends, forecasting an FY25 interim dividend of S$0.052 in November, and an additional VRD payment, bringing total potential dividends to S$0.09 per share over the next six months, translating to an attractive annualized yield of 5%. The ongoing improvements in Optus and strong dividend visibility are seen as key factors supporting the positive outlook.

RHB Invest also reiterates a BUY rating on SingTel. Key drivers include strong earnings momentum, positive news on data centre investments, market price repair, and additional sell-down of Airtel shares. The firm forecasts a rise in SingTel's ROIC to around 10% in FY25F and 11.3% in FY26F, supported by cost savings and synergies. The Thai amalgamation exercise could see SingTel’s 25% stake in Intouch substituted for a 9% holding in NewCo, potentially increasing its AIS stake by 10% at a total outlay of S$2.4bn. The introduction of a Variable Realisation Dividend (VRD) and a S$6bn capital recycling target further enhance the investment case. The target price includes a 4% ESG premium, although risks remain from competition and potential earnings shortfalls.

OCBC Investment raised its price target on SingTel to S$3.50 from S$3.04 and maintains a Positive rating on the shares. The analyst attributes the stock's 23% rally since the last report and 22% year-to-date gain to recent data centre deals, price hikes for Optus and Bharti, and a positive growth outlook. The firm highlights SingTel's new Singtel28 strategy, aimed at enhancing business performance and driving smart capital management through cost optimisation, AI-driven customer experiences, and simplified product offerings. Additionally, SingTel introduced a Value Realisation Dividend (VRD) program, which could bring FY25 total dividends to 13.5 cents per share, yielding 5.7%. The analyst notes that the potential rate cuts in 2H24 make SingTel an attractive investment.

In addition, UOB Kay Hian is optimistic about the Telecommunication Sector and expects continued earnings growth in FY2025 Q1.The institution stated that the sector's 16% year-on-year earnings growthi n this quarter was in line with expectations, driven by strong contributions from SingTel's regional associates, the ongoing realization of StarHub's DARE+ benefits, and improved overall cost discipline. For FY2025 Q1, UOB Kay Hian expects a slightly lower but still solid sector earnings growth of 8% year-on-year, supported by SingTel's regional associates and Optus.