Finally, SingTel sees hope for recovery from 3-year profit slump

You'll be surprised at the boosters.

According to Nomura, on operational trends, consensus now expect underlying EPS growth to return to the business after 3 years of declines – the majority of which was driven by Bharti in India. Bharti has seen 3 years of earnings declines too and we now expect 36% pa growth in its contribution to SingTel over the next 2 years.

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The other driver is Optus – where despite revenue weakness, EBITDA is expected to be more stable going forward. Similarly in Singapore, we expect 3-4% revenue and 1-3% EBITDA growth in 2 years.

On the macro front, a number of Asian stocks are trading at all-time highs, especially the ones with solid FCF, dividend yields and liquidity. SingTel fares well on these metrics. And there is potential for special dividends (~S10c) over the next 12 months, we believe, which we discuss in more detail later in the note.

SingTel shares are up 23% YTD after trading +/-10% of the SGD3.00 range for the previous 3 years. At SGD4.00 levels, it is almost at all-time highs (the recent high was in 2007 at SGD4.12 and the previous high was SGD4.50 in 1996).

Nomura noted that it appears to be a function of an improvement in operational trends and macro/ dividend appeal.