Singapore Telecommunications (Singtel) aims to improve its return on invested capital (ROIC) to the high-single digits in the mid-term, up from 5.4% in FY2022. Subsidiary Bharti&rsquo s ROIC, for example, could rise to 12%-13%, write CGS-CIMB Research analysts Foong Choon Cheng and Sherman Lam.

 

In a Sept 1 note, Foong and Lam are maintaining &ldquo add&rdquo on Singtel with an unchanged target price of $3.20, which represents a 21.7% upside.

 

Singtel aims to improve its ROIC by capturing growth opportunities in data centres and IT services as enterprises increase spending on digitalisation leveraging positive price momentum in India, Indonesia and Australia to grow average revenue per user (ARPU) deliver on enterprises&rsquo 5G innovation and continuing to optimise cost and capex.

 

Singtel hosted its annual Investor Day on Aug 31 after a two-year hiatus.

 

According to Foong and Lam, Singtel is comfortable with its current net debt/ebitda at 1.6x in 1QFY2023, while proceeds from its announced asset recycling programme now fully cover incremental 5G capex and growth initiatives. &ldquo Hence, we think it will be able to pay FY2023-FY2025 dividends at the top-end of its 60%-80% payout policy.&rdquo

 

Bharti grows

 

Bharti believes that another round of price hikes may be able to lift its ARPU by 30-40 rupees (53-70 cents) (1QFY2023: 183 rupees) and ROIC to 12%-13% (1QFY2023: 8%-9%).

 

Writes Foong and Lam: &ldquo While cost inflation is slowing lower-end subs&rsquo upgrade from feature to smartphones, this segment only makes up midteens of its overall revenue mix. Bharti continues to see good revenue growth in the higher end and little downtrading in the mid-end segments.&rdquo

 

For Singapore and Australian telecommunications company Optus, roaming revenue has rebounded nicely to 45%-50% of pre-Covid-19 levels, notes Foong and Lam, despite borders of the big North Asian markets still closed.

 

Meanwhile, Singtel Singapore&rsquo s 5G subscription rose 2.4 times from September 2021 to March 2022 to 480,000, with 17% in postpaid subscriptions. &ldquo On Aug 5, 5G services were offered to Gomo, Singtel&rsquo s digital SIM-only brand, and prepaid subs, where we gather take-up has been encouraging and the ARPU uplift is at least $5.&rdquo

 

Expansion mode

 

Singtel&rsquo s NCS and regional data centres are in big expansion mode, says Foong and Lam. &ldquo A mid- to longer-term driver, NCS targets to grow its revenue from FY2022&rsquo s $2.4 billion to $5 billion by FY2026.&rdquo

 

To achieve this, it plans to expand its staff force from 12,000 to 20,000, though the additions will mainly come from lower cost locations, such as Vietnam and India. Coupled with the impact from its acquisitions, NCS said ebit pressure will likely persist over the next one to two years.

 

For its regional data centre platform, Singtel aims to build-up its capacity fourfold to exceed 220MW across Singapore, Thailand and Indonesia in the next three to five years. It is also looking for suitable partners to expand into other Asean countries, such as Malaysia and Vietnam. It expects healthy ebitda margin of 50%, even outside of Singapore.

 

Singtel&rsquo s current share price implies FY2023F enterprise value/ebitda (EV/ebitda) of 3.6x for Singtel Singapore and Optus. Foong and Lam note &ldquo attractive&rdquo dividend yields of 4.3%-6.0% p.a. in FY2023-2025.

 
To encourage a habit of saving, GXS customers can also customise up to eight
Savings Pockets within their accounts.

Designed to help users save for specific goals, users can transfer funds anytime
from their main savings accounts to  individual Pockets. Customers also earn
greater daily interest with Pockets at 1.58% p.a.

In addition to naming their Pockets after their goals, users can also choose photo labels.
To help them stay on track,  the app will send nudges" to users, encouraging them to
top up their Pockets when they are close to reaching their  saving goals, says GXS.

According to Charles Wong, Singapore CEO of GXS, the bank will leverage Grab and
Singtel' s  platform  users, whichtogether welcome more than three million Singaporeans daily.
" GXS is uniquely positioned to  learn and to  refine the banking experience so that it is
extremely personalised and relevant to  customers because  we are part  of a powerhouse
ecosystem that includes Grab and Singtel."

" Wong had spent two decades at Citi before joining Grab in April 2020 as senior managing director.
He took on the lead  role at GXS in April 2022.

Wong adds: " The frequent interactions between consumers and the platforms within our ecosystem
provide us with  deeper and sharper insights on what our customers need and how we can serve
them seamlessly across all  touchpoints within our ecosystem."

GXS' s digital bank app will be available in Appe' s  App Store and the Google Play Store from Sept 5.