Maybank Securities is keeping its “buy” recommendation on Singapore Telecommunications Z74 (Singtel) with an unchanged target price of $3.24, as analyst Hussaini Saifee is upbeat on Optus’ latest contract win.
Recently, Optus Enterprise, the enterprise segment of Singtel’s Australia arm Optus, won a contract worth A$578 million from Services Australia for its customer contact management services. Contract duration is for six years starting from June 2024.
The government’s Services Australia has the largest contact centre operation handling over 1 billion online transactions and 55 million calls annually.
This comes on the back of Optus also raising its mobile plan prices.
See more: Analysts keep ‘buy’ on Singtel as Optus raises prices for Sim only plans
“We think Optus will leverage its existing physical and cloud/software infrastructure to provide the service and, as such, will require limited new capex/opex,” says Saifee.
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Assuming a modest ramp up in revenues over the contract life and a 40% EBITDA margin, the analyst estimates the new contract would help to lift Optus’ profit after tax by 15%-39% for FY2025-FY2027 (material lift mainly due to its low earnings base).
At the Singtel level, he sees the new contract helping earnings, FCF and SoTP rise by 0.7%-1.4% over FY2025-FY2027.
Saifee also likes that the stock’s holding company discount remains more than 40%.
As at 4.45pm, shares in Singtel are trading at $2.56.
