SingTel to juggle growth and value creation

It is keen to expand its digital services but not to the point of risking shareholders, says OCBC.

Expect the telco continue posting defensive earnings as the company exercises "financial prudence" as it pursues new growth drivers.

Here's more from OCBC:

SingTel will be adopting a new organisation structure from 1 Apr 2012. Instead of geographical segments, SingTel will divide its business into three segments – Group Consumer, Group Digital Life and Group ICT.

Separately, SingTel announced that it will wholly acquire US-based Amobee Inc. for US$321m cash.

We understand that revenue contributions, amounting to just US$30m/year, are relatively insignificant, but SingTel is confident that it can leverage its existing 400m customer base to quickly scale up the business.

In addition, SingTel intends to finance the deal with internal resources, which should just bump up its FY12F net gearing to 22.5% from 18.7% as of end-FY11.

SingTel is intent on reinventing its core carriage business and create new growth platforms in the digital services space. However, management stressed that it will remain financially prudent by striking a balance between achieving growth and creating value for shareholders. SingTel also reiterates its policy of a 55-70% dividend payout ratio.

We continue to like SingTel for its defensive earnings, hence we maintain our BUY rating and S$3.69 fair value.