Singapore Telecommunications

Price target:

Maybank Securities ‘buy’ $3.05

Positive quarterly indicators from Telkomsel

Maybank Securities analysts have kept their “buy” call and $3.05 target price on Singapore Telecommunications (Singtel), after positive 1QFY2024 ended March indicators reported by Telkonsel, its 29.6%-held Indonesia associate.

In 1QFY2024, Telkomsel’s core net income increased by 17.9% y-o-y and up 5.5% q-o-q,

thanks to lower costs even as revenue held steady.

“While Telkomsel went through a relatively tough patch in the past 1–2 years, we see improvement on the horizon as reflected in improving mobile momentum and visible Indihome integration synergies on the cost side,” write analysts Hussaini Saifee and Etta Rusdiana Putra in their April note.

Besides the main mobile services, Telkomsel offers home fixed line and broadband services via newly-acquired Indihome.

According to the Maybank analysts, Telkomsel is arresting the dip in its revenue market share experienced over the past five years via “tactical pricing intervention”.

Following the strong recovery of Bharti Airtel, Singtel’s associate in India, its two current operational “pain points” are Telkomsel, and Optus, the subsidiary in Australia.

“A positive Telkomsel delivery should be comforting. We also see competition in Australia improving in addition to cost-cutting opportunities,” the analysts say

“With multiple catalysts on the horizon, we find the 44% holding company discount as unjustified,” they add, referring to how the value of Singtel as a listed company is way smaller than the sum of parts of the value of the associates and other regional subsidiaries.

“For perspective, Singtel’s 29% stake in Bharti itself represents 93% of Singtel’s market cap, suggesting deep value and an arbitrage opportunity,” the analysts add.