UOBKayhian on 26 June 2014
FY15F PE (x): 16.1
FY16F PE (x): 14.8
Special dividend contingent on divestments of non-core assets. SingTel owns 494m shares or a 26.1% stake in SingPost, the dominant provider of domestic and international postal services in Singapore. The stock has rallied 33.2% ytd to S$1.765, benefitting from the collaboration with Alibaba Group to build an e-commerce logistics platform for Southeast Asia. SingTel considers SingPost a non-core asset and would consider divesting if it receives an offer from potential investors. SingTel would be able to dish out a special dividend of 5.5 cents/share if it can divest its stake in SingPost for S$872m, or S$1.765 per share. SingTel’s other non-core assets include wholly-owned NetLink Trust and a 45% stake in Pacific Bangladesh Telecom.
Re-iterate BUY. SingTel has been a laggard with share price increasing at a 10-year CAGR of 4.5% vs 6.4% for the FSSTI. We anticipate investor interest in SingTel to return as: a) the resilient growth in the US economy will have a positive impact on growth in emerging markets and SingTel’s regional mobile associates, and b) Bharti Airtel picks up after being affected by intense price competition in India and an ill-fated expansion into Africa. We raise our target price from S$4.10 to S$4.30, based on DCF (required rate of return: 5.95%, terminal growth: 1.0%).
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