MAYBANK Securities has lifted its target price on Singtel by 5 per cent to S$3.40 from S$3.24, after its associate, Bharti Airtel, said last week that it would raise mobile prices across various plans.
On Monday (Jul 1), analyst Hussaini Saifee said the new target price could be attributed mainly to a higher valuation of Singtel’s 29 per cent-owned associate, Bharti Airtel.
He expects the price hike of 10 to 21 per cent to raise Bharti’s India mobile revenues by 7 to 9 per cent for the fiscal year 2025 to FY2027. This projection came after the analyst factored in a price elasticity of 60 per cent and assumed a nine-month impact for FY2025.
He also projects that Bharti’s India mobile earnings before interest, taxes, depreciation and amortisation (Ebitda) will rise 7 to 10 per cent in FY2025 to FY2027, after assuming a 60 per cent pass-through impact of higher revenues on Ebitda.
Given the potential improvements in top line and Ebitda, and after accounting for a 25 per cent corporate tax rate, the analyst estimates Bharti’s earnings to increase 28 billion rupees (S$452 million) to 42 billion rupees in FY2025 to FY2027.
Additionally, he also highlighted that the price hikes in Bharti’s mobile plans could raise Singtel’s earnings. Hence, he lifted the company’s FY2025 to FY2027 earnings estimates by 4 to 8 per cent.
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“Although Bharti does not pay meaningful dividends, we think Singtel can raise its dividends in line with the lift in earnings helped by past and potentially a future small stake divestment in Bharti Airtel,” he added.
He also noted that Singtel’s plan to recycle S$6 billion of capital in the medium term could “partly come from a small Bharti Airtel stake sale”.
Noting an “all-round operational turnaround” and “multiple catalysts on the horizon”, the analyst reiterated his “buy” call on the counter.
Shares of Singtel were trading down 0.4 per cent or S$0.01 at S$2.74 as at 11.29 am on Monday.
