To The Moon

An Outsider's Look at Singtel: Beyond the Headlines

Alright, let's talk about Singtel. When you think of a behemoth like Singtel, the immediate thought for many is "telecom, slow growth, dividends." And while that's not entirely wrong, I think it's worth digging a bit deeper, especially after their latest financial year (FY25, ended March 31, 2025) results. They've been making some interesting moves that suggest a more dynamic picture than their traditional image might imply.

The Good, The Bad, and The Evolving: FY25 in Review

On the surface, FY25 looks pretty solid. Underlying net profit, which is what they base their core dividend on, saw a decent 9% jump to S$2.47 billion. If you strip out currency fluctuations, it's even better at an 11% increase. This is a positive sign, especially after what they themselves admit was six years of declining EBITDA. They managed a 5.4% increase in EBITDA for the full year, which is a commendable turnaround.

The reported net profit soared to S4.02 billion, a whopping five-fold increase year-on-year. But here's where you need to be a bit discerning: a significant chunk of that, S1.55 billion, came from a net exceptional gain, primarily from the partial divestment of their Comcentre headquarters and some gains from their associate, Airtel. While these asset recycling efforts are part of their strategy to unlock value and generate capital, they aren't indicative of core operational growth.

What's working for them?

 * Optus (Australia) and NCS (their tech services arm) are pulling their weight. Optus, after some past headwinds, seems to be stabilizing and contributing positively. NCS, their enterprise technology services business, is showing promise, which aligns with their pivot towards growth engines beyond traditional telco.

 * Regional Associates are a mixed bag, but mostly positive. Airtel and AIS have delivered robust performances, which is crucial as these associates contribute significantly to Singtel's overall profitability. Telkomsel and Globe had lower contributions, but the overall picture from associates is still strong, with pre-tax earnings up nearly 7%.

 * Cost Management and Focus on Higher-Margin Services: Both Singapore and Optus operations have seen margin improvements, suggesting a concerted effort in cost optimization and a shift towards more profitable services. This is essential in a competitive telecom market where pricing pressure is constant.

 * 5G Rollout and Enterprise Focus: Singtel achieved nationwide 5G coverage ahead of schedule, and they're not just offering faster speeds to consumers. They're actively leveraging 5G and technologies like Multi-Access Edge Computing (MEC) to empower businesses with solutions in areas like smart mining, construction, and even public safety. This enterprise segment, especially with NCS's capabilities, could be a significant growth driver. They're even venturing into AI cloud services with their RE:AI initiative.

Where are the yellow flags?

 * Singapore's Core Telecom: While cost control helped, Singtel Singapore's operating revenue actually fell 2% due to continued decline in legacy services and intense price competition in mobile. While they're trying to offset this with growth in SME and ICT segments, it's a persistent challenge in a mature market.

 * Investment in Growth Areas: While new growth engines like data centers and AI are exciting, they also require significant upfront investment. We're seeing this with a decline in EBIT margin for their Digital InfraCo business due to expansion costs. This is a long-term play, and patience will be needed for these investments to fully mature.

 * Capital Expenditure: While necessary for maintaining network quality and expanding new ventures, their total CAPEX is expected to increase from S2.4 billion in FY25 to S2.5 billion in FY26. This needs to be carefully managed to ensure efficient deployment and strong returns.

The Dividend Story: More Than Meets the Eye

Singtel has long been seen as a dividend stock, and they're clearly reinforcing that image. They've increased their FY25 dividend per share by 13.3% to 17.0 Singapore cents. What's particularly interesting is the introduction of a "value realization dividend" on top of their core dividend. This is explicitly tied to their asset recycling program, where they're selling off non-core assets to unlock value. They've even upped their asset sales target from S6 billion to S9 billion.

This isn't just about returning capital; it's a strategic move. By returning "excess" capital from these sales, they're demonstrating a commitment to shareholder returns while simultaneously streamlining their portfolio and focusing on their core and growth businesses. They've also announced a S$2 billion share buyback program, which further underscores their commitment to enhancing shareholder value by increasing EPS and DPS on a sustained basis.

The Competition and Future Outlook

The competitive landscape in Singapore is fierce, with StarHub and M1 constantly vying for market share. However, Singtel's extensive network, scale, and strategic investments in areas like 5G and enterprise solutions give them a solid competitive advantage. Their regional presence through associates further diversifies their revenue streams and provides exposure to growth markets.

Looking ahead, Singtel's "Singtel28" growth plan seems to be the guiding star. It's a two-pronged approach: lifting business performance (optimizing core, scaling growth engines like NCS and Nxera - their data center business) and smart capital management (asset recycling, partnerships). The focus on digital infrastructure (data centers) and AI is particularly noteworthy and could be a significant differentiator in the coming years.

My Takeaway

Singtel is more than just a sleepy telco. They are actively transforming, shedding non-core assets, reinvesting in growth areas like 5G, enterprise solutions, data centers, and AI, and importantly, demonstrating a strong commitment to shareholder returns through an enhanced dividend policy and share buybacks.

While the core Singapore telecom business faces headwinds, the growth from Optus, NCS, and regional associates, coupled with their strategic capital management and forward-looking investments, paint a more optimistic picture than one might initially assume. The real test will be how effectively they execute on their "Singtel28" plan and how quickly their new growth engines mature and contribute significantly to the bottom line. It's a company in transition, and that can be a compelling, albeit not without r

isk, investment story.