Singapore Telecom: Capital Returns Provide Downside Support; We See Three Potential Catalysts

Research evidence excerpt

Singapore Telecom: Capital Returns Provide Downside Support; We See Three Potential Catalysts

IdeaM

Risk Reward - Singapore TelecomTop Pick (STEL.SI)Risk Reward – Singapore Telecom (STEL.SI)

Capital returns provide downside support; we see three potential catalysts

PRICE TARGET S$5.50 OVERWEIGHT THESIS

Base case, average of EV/EBITDA-based SOTP, DCF, and dividend yield.

SOTP: Singapore 6x, Optus 7x, NCS 5x, Digital Infraco 20x. Prices for covered listed ▪Bottom-up: Competition improving across

associates. Current prices for non-covered. 15% holdco discount. DCF value for unlisted core markets and regional associates; we see

Telkomsel, adjusted by ownership stake. potential restructuring options to further

DCF: Singapore WACC 7.3%, 2% terminal growth; Optus WACC 8.4%, terminal growth 3% unlock asset value and DC build-out to drive

Dividend yield: F28e 3.9%, yield spread of 1.5ppt vs. Singapore 10-year growth.

Beneficiary of Singapore's S$5.42 ▪Top-down:

market reforms and exposure to the AI

Consensus Price Target Distribution S$5.00 S$5.80 theme through data center growth. MS PT

project DPS to rise 5% p.a. over F26-Source: Refinitiv, Morgan Stanley Research Mean Morgan Stanley Estimates ▪We

29e, driven by EPS CAGR of 12% and capital

return from asset monetization.

▪Extension of Value Realisation Dividend

RISK REWARD CHART and share buyback could provide downside

support.

SGD ▪Potential for more corporate actions -

S$6.50S$6.50(+38.30%)S$6.50(+38.30%)(+38.30%) Singapore telco M&A, Optus minority stake

sale, and REIT IPO - are key upside catalysts.

S$5.50S$5.50(+17.02%)S$5.50(+17.02%)(+17.02%)

Consensus Rating Distribution

S$4.70S$4.70S$4.70

4.5 86% Overweight

14% Equal-weight

S$3.90S$3.90(-17.02%)S$3.90(-17.02%)(-17.02%) 0% Underweight

MS Rating