Company Coverage
Singapore Telecommunications (ST SP): 1QFY27: In Line; Tracking Ahead of FY27 EBIT Guidance
BUY (Maintained)
Current price:
Target price:
Upside:
S$4.27
S$5.50
28.8%
Analyst
Highlights
- Singtel delivered robust 1QFY27 underlying net profit of S$831m (+21 yoy), driven by higher Airtel and AIS contributions and growth in Optus, NCS and
Digital Infraco. Results are in line with expectations.
- The Singapore market saw price competition, leading to a 2% yoy decline in EBIT. Optus ARPU uplift yielded positive results that will flow through into
2QFY27.
- Maintain BUY with an SOTP-based target price of S$5.50.
Analysis
- Strong 1QFY27 performance. Singapore Telecommunications (Singtel) reported underlying net profit of S$831m (+21 yoy), in line with house and
street estimates. The quarter saw: a) 10% yoy opco EBIT growth from Optus, NCS and Digital Infraco; and b) 15% yoy increase in associate
earnings. Singtel Singapore EBIT fell 2% yoy, reflecting intense price competition, partly offset by lower depreciation.
- Optus: ARPU uplift to sustain into 2QFY27. On a constant currency basis, 1QFY27 operating revenue fell 2% yoy on weaker device sales. That said,
service revenue rose 3% yoy on the back of ARPU uplift (effective May 26). The higher service revenue, lower depreciation and overall cost discipline
led to EBIT growth of 14% yoy to A$152m. Postpaid and prepaid subscribers declining by 39,000 and 14,000 qoq, respectively.
- Singapore: Intense mobile competition. 1QFY27 mobile service revenue fell 4% yoy given intense price competition. Increase in data and internet
was offset by decline in mobile, ICT and legacy services. Overall, EBIT fell 2% on lower depreciation charges. Blended ARPU was stable qoq at
S$22/month with a net add of 51,000 subscribers in the quarter.
- NCS: Orderbook remains healthy. NCS reported 1QFY27 revenue and EBIT growth of 10% yoy and 29% yoy respectively. This reflects robust
demand for digital resilience services. Effective cost discipline has led to its 1QFY27 EBIT surging 29% yoy. During the quarter, NCS secured new
orders amounting to S$860m, book-to-bill ratio of 1.1x.
- Digital Infraco: Strong revenue uplift of 19% yoy driven by the commissioning of Nxera’s DC Tuas (in Jan 26) and capacity deployment
from RE:AI’s AI cloud service. EBIT rose 10% yoy after including higher depreciation charges with the commissioning of DC Tuas.
- Regional associates: Strong performance from Airtel and AIS. Airtel group reported a 39% yoy jump in net contribution, driven by India mobile
ARPU uplift of 5%, and record subscribers net add in the quarter. AIS recorded a 33% increase in net contribution, supported by higher mobile and
broadband service revenue, cost discipline and lower depreciation. Globe’s net contribution fell 9% yoy. Despite healthy demand for data usage and
connectivity, earnings were dragged down by elevated depreciation and finance costs. Telkomsel’s net contribution rose marginally by 2% yoy as
price competition was stable in the quarter. That said, we note that price competition has been intense in Jul 26.
Highlights
- Singtel delivered robust 1QFY27 underlying net profit of S$831m (+21 yoy), driven by higher Airtel and AIS contributions and growth in Optus, NCS and
Digital Infraco. Results are in line with expectations.
- The Singapore market saw price competition, leading to a 2% yoy decline in EBIT. Optus ARPU uplift yielded positive results that will flow through into
2QFY27.
- Maintain BUY with an SOTP-based target price of S$5.50.
Analysis
- Strong 1QFY27 performance. Singapore Telecommunications (Singtel) reported underlying net profit of S$831m (+21 yoy), in line with house and
street estimates. The quarter saw: a) 10% yoy opco EBIT growth from Optus, NCS and Digital Infraco; and b) 15% yoy increase in associate
earnings. Singtel Singapore EBIT fell 2% yoy, reflecting intense price competition, partly offset by lower depreciation.
- Optus: ARPU uplift to sustain into 2QFY27. On a constant currency basis, 1QFY27 operating revenue fell 2% yoy on weaker device sales. That said,
service revenue rose 3% yoy on the back of ARPU uplift (effective May 26). The higher service revenue, lower depreciation and overall cost discipline
led to EBIT growth of 14% yoy to A$152m. Postpaid and prepaid subscribers declining by 39,000 and 14,000 qoq, respectively.
- Singapore: Intense mobile competition. 1QFY27 mobile service revenue fell 4% yoy given intense price competition. Increase in data and internet
was offset by decline in mobile, ICT and legacy services. Overall, EBIT fell 2% on lower depreciation charges. Blended ARPU was stable qoq at
S$22/month with a net add of 51,000 subscribers in the quarter.
- NCS: Orderbook remains healthy. NCS reported 1QFY27 revenue and EBIT growth of 10% yoy and 29% yoy respectively. This reflects robust
demand for digital resilience services. Effective cost discipline has led to its 1QFY27 EBIT surging 29% yoy. During the quarter, NCS secured new
orders amounting to S$860m, book-to-bill ratio of 1.1x.
- Digital Infraco: Strong revenue uplift of 19% yoy driven by the commissioning of Nxera’s DC Tuas (in Jan 26) and capacity deployment
from RE:AI’s AI cloud service. EBIT rose 10% yoy after including higher depreciation charges with the commissioning of DC Tuas.
- Regional associates: Strong performance from Airtel and AIS. Airtel group reported a 39% yoy jump in net contribution, driven by India mobile
ARPU uplift of 5%, and record subscribers net add in the quarter. AIS recorded a 33% increase in net contribution, supported by higher mobile and
broadband service revenue, cost discipline and lower depreciation. Globe’s net contribution fell 9% yoy. Despite healthy demand for data usage and
connectivity, earnings were dragged down by elevated depreciation and finance costs. Telkomsel’s net contribution rose marginally by 2% yoy as
price competition was stable in the quarter. That said, we note that price competition has been intense in Jul 26.
BUY (Maintained)
Current price:
Target price:
Upside:
S$4.27
S$5.50
28.8%
Analyst
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