Singtel Earnings: Solid Guidance With Cost Reductions to Come; Increasing Fair Value to SGD 2.50

We increase our fair value estimate for narrow-moat Singtel to SGD 2.50 from SGD 2.40 previously following the release of a fiscal 2024 result that was broadly in line with our expectations. The increase was due to the increased share prices of its listed associates since the previous update, particularly Bharti Airtel, and an increase in underlying earnings due to reduced depreciation following SGD 513 million of asset write-downs made in fiscal 2024 partially offset by higher capital expenditure in fiscal 2024. Along with the asset write-downs, Singtel put through a SGD 2.6 billion goodwill impairment with the fiscal 2024 result mostly related to Optus, as previously announced. Management guided to high-single-digit to low-double-digit EBIT growth in fiscal 2025, boosted by SGD 200 million of cost savings in Singtel Singapore and Optus and reduced depreciation. The sale of Trustwave, which contributed a SGD 133 million loss in fiscal 2023, should also help. Capex in fiscal 2024 is expected to be SGD 2.8 billion with around SGD 1.8 billion of that considered “core” and SGD 1 billion to be invested in data centers and satellites. This will be topped up by spectrum payments of AUD 1.5 billion for 900 megahertz in Australia and SGD 0.4 billion for 700 MHz spectrum in Singapore.