Maybank Securities analyst Hussaini Saifee has maintained his “buy” call on Singapore Telecommunications Z74 (Singtel) while keeping his target price of $3.65. This follows Singapore Post S08 ’s (SingPost) announced divestment of its Australia business,which could provide Singtel with special dividends — adding to its capital return arsenal.
SingPost is Singtel’s 22% owned associate, Hussaini notes. Analyst Jarick Seet, which covers the stock, expects a special dividend of $360 million on this transaction, translating to $79 million as Singtel’s portion of special dividends.
Seet further points out the potential divestment of other SingPost assets, which could lead to more special dividends in the medium long term.
Hussaini highlights that Singtel has previously flagged $6 billion in potential capital recycling as part of its Singtel28 strategy. To this end, he sees two potential capital-recycling targets over the medium term — the equalisation of its own stake in Bharti with the Mittal family and the divestment of its stake in Gulf Energy.
While these capital recycling targets could be executed in tranches over a medium term, Maybank believes that Singtel has already generated $2 billion in proceeds from capital recycling in 2024 to 2025 which in turn can help to support near term value realisation dividends, says Hussaini.
Hussaini estimates that Singtel will generate free cash flow (FCF) of $4.9 billion over FY2025 to FY2027, with past and expected capital recycling adding a $8 billion buffer.
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Assuming SingPost pursues these capital returns, Hussaini sees potential for another $300 million in special dividends. This yields a $13.2 billion cashflow and asset recycling buffer for dividends in FY2025 to FY2027. Singtel’s estimated dividends over FY2025 to FY2027 total $8.9 billion.
According to Hussaini, “this suggests excess capital of $4.3 billion, which could be partly used for share buybacks, in our view.”
As at 11.29 am, shares in Singtel are trading 4 cents higher or 1.28% up at $3.17.
