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Summary of Singapore Telecommunications (ST SP) Analysis

Core Content Overview

This document provides an analysis of Singapore Telecommunications (ST), focusing on its share price, target price, market capitalization, and financial performance. It also outlines the company's strategy across its operating subsidiaries, associates, and Group Digital Life (GDL), emphasizing growth expectations and investment in digital initiatives.

Key Financial Metrics

Share Price and Target Price

• Current Share Price: SGD3.88
• Target Price: SGD4.35 (+12% from current price)
• Market Capitalization (USD): 49.5B
• Average Daily Trading Volume (USD): 45M
• 52-week high/low (SGD): 3.97 / 3.44
• 3-month average turnover (USD m): 45.4
• Free float (%): 42.4
• Issued Shares (m): 15,944
• Major Shareholders:
  • Temasek Holdings: 51.9%
  • Central Provident Fund: 5.7%

Main Growth Drivers

1. Singapore

• 4G adoption is increasing, leading to tiered data plans and mobile video services.
• Pay TV is expected to become more profitable as SingTel reaches a critical mass.
• The migration of 2G users to 3G and later to 4G will allow network rationalization and spectrum refarming.

2. Indonesia (Telkomsel)

• Rapid smartphone adoption is driving data usage growth.
• Telkomsel reported 142% YoY growth in data traffic for 1Q14.
• Spectrum constraints may require swapping and refarming to enable 4G deployment.

3. India (Bharti Airtel)

• Pricing power is expected to be sustainable due to industry consolidation.
• Second round of consolidation is anticipated, with smaller operators like Aircel possibly being sold.
• African operations are starting to break even at the EBITDA level.

4. Philippines (Globe Telecom)

• Data usage incentives are being implemented to counter declining voice/SMS revenue.
• New data plans are bundled with services like Spotify.
• Plans to expand self-owned and franchised retail stores and invest in converged billing systems.

Group Digital Life (GDL)

• GDL is investing SGD2b in mobile advertising, mobile video, and big data analytics.
• These investments are not expected to harm dividends, as the group maintains financial discipline.
• AIS (Thailand) may cut guidance due to political turmoil, but it is not expected to significantly affect overall growth.

Key Investment Areas and Strategy

• Optus is working to regain market share in Australia by improving 4G coverage and launching aggressive data plans.
• Data sharing options and lower pricing are being introduced to compete with Telstra.
• Digital Life initiatives aim to enhance telco services and provide competitive advantages to operating companies.

Outlook and Recommendations

• The SOTP valuation is expected to grow for 82% of the group in FY3/15E, up from 34% in FY3/14E.
• Dividends are expected to remain intact despite digital investments.
• Investor Day 2014 reaffirmed a BUY recommendation with a target price of SGD4.35.
• GDL is likely to pursue more acquisitions, especially in big data analytics.

Conclusion

SingTel is positioned for growth in multiple markets, driven by 4G adoption, data usage increases, and strategic investments. The dividend remains stable, and the Group Digital Life is playing a key role in enhancing operational competitiveness. Despite some challenges, such as AIS guidance cuts, the overall outlook for the company is positive, with revenue and profitability expected to improve in the coming years.