Singapore Telecommunications (Singtel) has unlocked another $0.95 billion with the sale of a 0.8% direct stake in regional associate Airtel to US-based investment firm GQG Partners. The resultant gain from the sale is estimated to be $0.7 billion.
Singtel is taking advantage of the recent popularity of Indian stocks among investors. Bharti Airtel's share price gained more than 50% over the past 12 months.
For Singte, this transaction is also the latest in the group’s capital recycling efforts to unlock value from its assets, bringing the total capital recycled to $8 billion since its strategic reset announced in 2021. This has allowed the group to fund the growth of its data centre and IT services, as well as reduce net debt by $3.2 billion as of end September 2023.
The group has also returned $0.8 billion in special dividends to shareholders from capital recycling, contributing to cumulative dividends of $5.2 billion paid out to shareholders since April 2022.
Arthur Lang, Singtel Group CFO said, “We're pleased to have raised $0.95 billion, while adding a marquee name to Airtel’s share base. The group is now in an even stronger position to execute our disciplined capital approach of balancing investing for greater growth and delivering strong, sustainable returns for our shareholders.
"Last November, we raised our dividend policy to between 70% and 90% of underlying net profit and are on track to pay at the upper end of that range this financial year, barring any unforeseen circumstances.”
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Lang adds that the group will continue to look at actions to improve total shareholder returns via sustainably growing dividends and share price appreciation.
“We believe the current share price does not reflect the intrinsic value or growth potential of the group,” he says, referring to Singtel's own share, which has barely changed in the past 12 months, and which has dropped by around a fifth over the past five years.
While analysts have been positive on the group’s prospects, consensus too believe that Singtel’s share price is undervalued.
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In the group’s FY2023 ended December 2023, the group’s telecom associates contributed over 67% of the group’s operating profit. ‘Currently, the holding company (HoldCo) discount has expanded from less than 15% in FY2018 to 48%, as the share does not reflect the rise in the market value of its associates,” says DBS analyst Sachin Mittal.
Meanwhile, Lang continues to see steady growth across all of Airtel’s businesses, which has resulted in strong valuations. “We believe there’s more room for growth given India’s accelerated digital transformation and we intend to stay invested for the long term while working with Bharti Enterprises to equalise our effective stake in Airtel over time,” says Lang.
Singtel has been a strategic investor in Airtel, one of the world’s top three mobile operators with over 500 million customers in 17 countries, for more than 20 years. After the transaction, Singtel will hold an effective stake of 29.0% in Airtel, worth an estimated $33 billion. In 2022, Singtel sold a 3.3% direct stake in Airtel for approximately $2.54 billion to illuminate the value of its holdings in Airtel.
Shares in Singtel traded at $2.35 at 3.20pm.
