Singapore Telecommunications (Singtel) offers one of the most compelling data centre plays in the region thanks to its data centre assets in captive markets, says the Singapore equity research team at RHB Bank Singapore.
The telecommunications company’s regional data centre business, Nxera, is a “major growth engine” and a “focal point” within its Singtel28 mid-term growth strategy. Unveiled on May 23, Singtel28 is the telco’s plan to enhance customer experiences and deliver “sustained value realisation” for its shareholders.
When private equity investor KKR took up a 20% stake in Nxera for US$800 million ($1.03 billion) in September 2023, Nxera was valued at US$4 billion or 32 times its EV/Ebitda. “KKR’s investment will help to defray data centre capital expenditure [capex] across the region,” says the team.
In addition, the joint venture with Telekom Malaysia (TM), where Singtel has a 49% stake in the AI-ready data centre in Johor, complements the telco’s regional footprint. Furthermore, Singtel has strategic tie-ups with local telcos and investors for data centres in Thailand and Indonesia.
In Singapore, Singtel is the largest data centre operator of 60MW and will be expanding its capacity by another 58MW at its Tuas facility. Together, the group expects to have over 200MW of capacity across its regional data centre platform to be operational by 4Q2026 and over 400MW by 2028.
“We see a step-up in data centre contributions flowing through its Digital InfraCo segment from FY2027 with management guiding for data centre ebitda to double by FY2028,” says RHB. Data centres contributed $299 million in revenue and $163 million in ebitda in FY2024, with the group benefitting from price uplifts.
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Singtel is the only Singapore-listed stock to feature in RHB’s top picks in its data centre report dated Oct 2. The brokerage has a “buy” call on the counter with a target price of $3.50.
