Singtel: Can Singtel’s core value rise by > 200%?
- Singtel’s associate value up ~62% since 2017, yet the stock trades flat, as core value (Singapore + Australia) down ~80%
- Core value could rise 180% with high visibility of 10% earnings CAGR over FY25-28F, leading to P/E re-rating from 6.6x to 18.5x; key drivers being Optus, NCS & data centre
- BUY, TP raised to SGD4.58, as we expect market to reward Singtel for improving its core businessPotential catalysts: Higher investment in core business & potential consolidation in Singapore
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However, Singtel’s core business valuation, at SGD28bn (SGD1.65 per share) in 2017, has declined by ~80% to SGD5.5bn (SGD0.33 per share) as of June 2025. We expect the value of the core business to grow by ~300% over the next 12 months, propelled by growth in the data centre, NCS, and Optus. Our 12-month forward P/E of 18.5x is at a 5% premium to its peer average of 17.5x, as we project a core earnings CAGR of 10% for Singtel over FY25-28F, vs. peers’ 7% CAGR due to data-centre and NCS leading to higher growth.
We estimate core value growth of ~180% over the next 12 months. Growth in data centre, NCS, and Optus are expected to drive a core business net profit CAGR of 10% over FY25-28F for Singtel. The uplift in core net profit is underpinned by projected core EBIT growth of 9% over FY25-FY28F, supported by 5% and 15% growth in Singapore and Optus EBIT over FY25-28F, respectively. Positive surprises could come from the ramp-up of data-centre, GPUaaS and potential consolidation in Singapore.
We project Optus EBIT CAGR of 15% over FY25-28F. We estimate Optus' EBIT margin will grow from 5.5% in FY25 to 7.8% in FY28F, supported by its recent tariff hikes: a AUD2-6 monthly increase for SIM-only postpaid mobile plans effective June 2025, and an AUD1 (AUD4 for 28-day plans) increase for prepaid plan recharges effective April 2025. Optus also implemented a price hike in 2024, increasing monthly access fees for NBN plans by AUD4-6 and mobile plans by AUD3-6 per service. Optus delivered a 5.7% y/y increase in EBITDA to AUD2,223mn (SGD1,938mn) for FY25, along with a substantial 55% y/y rise in EBIT to AUD446mn (SGD389mn). We project Optus’ EBIT growth to outpace its EBITDA growth of 2% over FY25-28F, driven by (i) an expected decline in D&A expenditure over the next three years following a 19% y/y reduction in Optus' capex in FY25, (ii) Network sharing agreement with TPG Telecom to reduce the need for duplicate infrastructure investments while additional spectrum from TPG would also allow Optus to save capex for regional expansion, leading to further drop in depreciation expenses.
Australian peers are also broadly implementing price increases across services. Telstra is increasing the prices of most NBN plans by AUD3-4 starting July 2025, having already raised mobile plan prices by AUD2-5 monthly in 2024, moving away from Consumer Price Index (CPI)-linked annual reviews. Vodafone has also announced price hikes for mobile and broadband customers from April 2025, with some broadband contracts seeing a 6.4% rise and most prepaid mobile plans increasing by AUD5 per recharge. This industry-wide trend is further underscored by NBN Co's 4.1% average increase in wholesale prices for FY25, tied to the CPI, which suggests a general upward trajectory in telecommunications costs for Australian consumers.
We project a 10% NCS EBIT CAGR over FY25-28F, with its EBIT contribution rising from 18% of group core EBIT in FY25 to 19% in FY28F. We estimate NCS’s EBIT margin will grow from 8.5% in FY25 to 10% in FY28F, given the potential for improvement compared to its global peers. The APAC IT services market is projected to grow at a CAGR of 6.2% between 2024 and 2028, with the Philippines alone expected to grow at 8.7%, according to IDC. NCS’s FY25 revenue and EBIT grew by 5% and 39% y/y, respectively, driven by Gov+, the strategic business group focused on expanding NCS’s digital government portfolio and capitalising on demand for cloud, data, and digital services. Importantly, a focus on profitability drive EBITDA margin expansion from 9.4% in FY24 to 11.1% in FY25, through improved delivery margins and cost-to-serve optimisation.
Rising offshoring to drive NCS margins. NCS announced its planned acquisition of a 51% stake in Yondu, Globe Telecom’s IT services arm in the Philippines, in March 2025. The acquisition aims to enhance global access to digital, cloud, data, and AI services. Yondu’s current workforce of 150 is expected to grow to over 1,200, leveraging NCS’s global expertise in digital transformation, cloud computing, data analytics, and AI. This will strengthen Yondu’s existing service offerings, including custom software development, e-commerce solutions, and cloud platforms.
We project a 25% CAGR for Nxera data centre EBIT over FY25- 28F. Singtel has guided for a doubling of its date centre (DC) EBITDA by FY28F (from FY24 levels). We project a 25% CAGR for the Nxera data centre EBIT over FY25-28F, reaching a 6% contribution to group core EBIT in FY28F (4% in FY25), driven by the new Tuas and Thailand data centres. We estimate Nxera data centre EBIT margin will grow from 14.7% in FY25 to 16.5% in FY28F. Nxera’s Tuas and Thailand data centres achieved ~50% and ~80% pre-sold capacity, respectively, in FY25. Singtel plans for the DC Tuas data centre to be operational in January 2026 and the Thailand data centre in June 2025. Singtel has guided that while capex for data centres, AI, digitalisation, and satellites will be significant, external capital partners and advanced satellite receipts from customers will fund SGD0.6bn of it. Nxera’s FY25 EBIT rose 12% y/y, driven by non-recurring customer reservation fees and utility pass-through. Singtel secured a SGD643mn (USD476mn) green loan to finance the construction of the 58MW DC Tuas data centre, which is expected to operate at a Power Usage Effectiveness (PUE) of below 1.25 at full load, making it one of the most efficient facilities in the market.
Singtel’s GPUaaS offering could potentially be a positive surprise. Singtel has partnered with Nvidia to deploy GPUaaS, expanding its reach to the rest of Southeast Asia through Bridge, a regional telco alliance. The October 2024 launch of RE:AI, its new AI Cloud service offering, should further drive GPUaaS growth. This turnkey AI development and deployment platform combines state-of-the-art AI compute infrastructure, graphics processing units (GPUs), and storage, AI workspaces and tools, and diverse network options, such as 5G, fixed, or quantum-safe networks. These will be delivered through Singtel’s patented orchestration platform, Paragon. We expect the GPUaaS offering to fall under the satellite and others segment within Singtel’s Digital Infraco business. We project 2% and 5% CAGRs for this segment's revenue and EBITDA, respectively, over FY25-28F, propelled by growth in the GPUaaS business.
Global GPUaaS market expected to rise by ~27% over 2025-2030. According to Research and Markets, the global GPUaaS market is projected to grow from USD8.21bn in 2025 to USD26.62bn by 2030, implying a robust CAGR of 26.5%. This rapid growth is driven by increasing demand for AI, gaming, rendering, and data-intensive applications, making it a structurally attractive space for players like Singtel.
The "DeepSeek effect" signals a nuanced picture of GPU demand. While efficiency gains and a shift towards inference workloads are reducing demand growth for large training GPU clusters, favouring specialised, cost-efficient inference chips (e.g., ASICs) and smaller GPU instances, demand for high-end GPUs remains robust. This sustained high-end demand is fuelled by large hyperscale investments, significant cloud adoption of new GPUs, and deals like the CoreWeave-OpenAI agreement for training capacity. Microsoft’s USD80bn commitment to AI capex in FY25F further exemplifies this trend. Furthermore, AWS, Azure, and Google Cloud are deploying Nvidia’s latest Blackwell (B200/GB200) GPUs for both training and inference workloads. CoreWeave’s USD11.9bn deal with OpenAI in March 2025 to supply GPU capacity emphasises the continued need for high-end computing in foundational model development. This highlights that while efficiency gains are being made, cutting-edge model development still relies heavily on powerful GPUs, driving continued demand for premium AI infrastructure. DeepSeek’s efficiencies allow for model experimentation without reducing overall training spend. This is leading to a more diversified hardware landscape, with specialised chips for inference, and powerful GPUs remaining crucial for training.
Potential consolidation in Singapore telco space could drive growth in Singtel’s mobile business. A potential merger between StarHub and M1 might significantly benefit Singtel's Singapore business. This consolidation would ease the intense price competition, particularly in the mobile virtual network operator (MVNO) space, which has historically driven down average revenue per user (ARPU) across the industry.
Maintain BUY with a higher TP of SGD4.58 (prev: SGD4.40). Given Singtel’s higher divestment target of SGD9bn (prev SGD6bn) over the next three years, we narrow the HoldCo discount to 10% (prev 15%) and value its associates at SGD3.66 per share (prev: SGD3.50), using market prices for all except Telkomsel, which is valued at fair value. With improving visibility of core earnings from Singapore & Australia, we switch our valuation methodology from EV/EBITDA to an 18.5x 12-month forward P/E ratio, resulting in a core value of SGD0.93 per share (previous SGD0.90). Singtel’s share price of SGD3.89 implies a core value of SGD0.33 per share, suggesting a ~6.6x P/E ratio for the Singapore & Australia businesses. Bharti is expected to contribute 17-18% of Singtel’s earnings in FY26F but trades at ~34x 12-month P/E and contributes ~62% of Singtel’s market value.
FY Mar | 2H2024 | 1H2025 | 2H2025 | % chg y/y | % chg h/h |
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Revenue | 7,099 | 6,992 | 7,154 | 0.8 | 2.3 |
Cost of Goods Sold | (5,382) | (5,172) | (5,417) | 0.7 | 4.7 |
Gross Profit | 1,718 | 1,820 | 1,737 | 1.1 | (4.6) |
Other Oper. (Exp)/Inc | (1,145) | (1,082) | (1,094) | (4.5) | 1.1 |
Operating Profit | 573 | 738 | 643 | 12.3 | (12.9) |
Other Non Opg (Exp)/Inc | 0 | 0 | 0 | - | - |
Associates & JV Inc | 1,143 | 1,169 | 1,330 | 16.4 | 13.8 |
Net Interest (Exp)/Inc | (175) | (175) | (167) | 4.6 | 4.6 |
Exceptional Gain/(Loss) | (2,481) | 42 | 1,505 | nm | nm |
Pre-tax Profit | (940) | 1,774 | 3,311 | nm | 86.6 |
Tax | (398) | (535) | (522) | 31.3 | (2.4) |
Minority Interest | (4) | (7) | (4) | (11.1) | (42.9) |
Net Profit | (1,341) | 1,232 | 2,785 | nm | 126.1 |
Net profit bef Except. | 1,140 | 1,190 | 1,280 | 12.3 | 7.6 |
EBITDA | 1,716 | 1,907 | 1,973 | 15.0 | 3.5 |
Margins (%) |
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Gross Margins | 24.2 | 26.0 | 24.3 |
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Opg Profit Margins | 8.1 | 10.6 | 9.0 |
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Net Profit Margins | (18.9) | 17.6 | 38.9 |
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Source of all data: Company, DBS
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