Singapore Telecommunications Upgraded to Buy on Strong Associates Performance and Growth Visibility, S$5.20 Target Maintained August 21, 2026
Company Overview
Singapore Telecommunications Ltd operates as a leading telecommunications group with significant operations across Singapore and Australia through Optus, alongside strategic regional associates across Asia. The company has been expanding into digital infrastructure through its data centre operations and emerging technologies.
Analyst Recommendation
Phillip Securities Research has upgraded Singapore Telecommunications from Accumulate to Buy, maintaining their target price of S$5.20 based on a sum-of-the-parts valuation. The upgrade comes following recent price weakness and improved visibility in growth prospects.
Financial Performance Analysis
The company’s first quarter 2027 results aligned with expectations, with revenue and EBITDA representing 24% and 27% of full-year forecasts respectively. EBITDA demonstrated solid growth of 9% year-on-year, primarily driven by contributions from Optus and NCS operations. The firm anticipates that the recovery in EBIT growth to 10% in the first quarter will enable management to revise upward their low- to mid-single-digit FY27 EBIT guidance.
Key Positives: Associate Strength Drives Performance
The standout performer was the regional associates division, where profit after tax surged 16% year-on-year to S$544 million despite facing a substantial 10 percentage point currency headwind. Excluding these foreign exchange impacts, associate earnings would have expanded by an impressive 26% year-on-year. This resilience stems from continued average revenue per user growth amid relatively benign competitive conditions, whilst consumers have maintained spending patterns despite inflationary pressures.
The essential nature of mobile services became evident through substantial data consumption increases, with India recording a 38% year-on-year rise in data usage per customer and Thailand achieving 16% growth. These metrics underscore the structural demand underpinning the business model.
Key Challenges: Domestic Market Pressures
The primary concern centres on declining Singapore mobile revenue, where EBITDA contracted 4.5% year-on-year to S$363 million. This deterioration resulted from a 4% decline in mobile services revenue as Singapore Telecommunications matched competitors’ lower pricing to defend market share in an increasingly competitive domestic environment.
Growth Catalysts and Monetisation Opportunities
The analysts highlight enhanced visibility around asset monetisation strategies, which could encompass selling stakes in Optus, listing the Nxera digital infrastructure company, or pursuing an initial public offering for Indian data centre assets. The GPU-as-a-Service initiative through RE:AI presents significant potential, with projections suggesting annual EBITDA of S$200 million once full capacity deployment is achieved.
Frequently Asked Questions
Q: What was Phillip Securities Research's recommendation and target price for Singapore Telecommunications?
A: Phillip Securities Research upgraded the stock from Accumulate to Buy whilst maintaining their target price of S$5.20 based on sum-of-the-parts valuation.
Q: How did the regional associates perform in the latest quarter?
A: Regional associates delivered strong performance with profit after tax increasing 16% year-on-year to S$544 million, despite facing a 10 percentage point currency headwind that would have otherwise supported 26% growth.
Q: What challenges is Singapore Telecommunications facing in its domestic market?
A: The Singapore operations experienced EBITDA decline of 4.5% year-on-year to S$363 million due to a 4% fall in mobile services revenue, as the company matched lower price points to maintain market share.
Q: What asset monetisation opportunities does the company have?
A: The company could pursue asset monetisation through selling stakes in Optus, listing Nxera digital infrastructure company, or conducting an IPO for Indian data centre assets.
Q: What is the potential of the GPU-as-a-Service initiative?
A: The RE:AI GPU-as-a-Service offering could generate annual EBITDA of S$200 million when the entire allocated capacity is fully deployed.
Q: How is data consumption trending across key markets?
A: Data usage per customer showed strong growth with India recording 38% year-on-year increase and Thailand achieving 16% growth, demonstrating the essential nature of mobile services.
Q: What drove the upgrade recommendation despite domestic challenges?
A: The upgrade was based on recent price weakness, better-than-expected associate performance despite challenging conditions, and improved visibility in growth drivers including data centre expansion and new EBITDA sources.
This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.
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About the author
Paul Chew
Paul has more than 25 years of experience as a fund manager and sell-side analyst. He currently covers sectors such as healthcare, electronics, telecommunications, conglomerates, small caps, and strategy.
He graduated from Monash University and has completed both his Chartered Financial Analyst and Australian CPA programme.
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