Analysts at CGS-CIMB remain “overweight” on the Singapore telco sector as the earnings risk from more intense mobile competition due to TPG’s entry have been priced in.

In an Oct 8 report, analysts Foong Choong Chen, Ong Khang Chuen and Andrea Choong say the mobile segment is expected to be more stable, with enterprise revenues rising stronger in CY22F compared to the previous year. 

The key downside risks for the sector include worse-than-expected mobile competition and a prolonged Covid-19 travel restriction. The former would weigh on Singtel and StarHub’s mobile revenue performance, while the latter would delay the full recovery of both mobile network operators’’ international roaming and prepaid revenues. 

The analysts choose Singtel as its top pick, while also highlighting StarHub and Netlink NBN Trust (Netlink Trust) with “add” recommendations for all three counters. CGS-CIMB’s target price for Singtel, StarHub and Netlink Trust are $2.90, $1.65 and $1.10 respectively. 


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Singtel and StarHub are the environmental, social and corporate governance (ESG) leaders in Asean, the analysts point out. Both companies topped CGS-CIMB’s Asean ESG rankings, with scores surpassing its peers in Malaysia and Thailand within the firm’s coverage as at end-CY20. 

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Although Netlink Trust could not be compared directly against the other telcos due to the difference in its business model, the analysts believe that the company has also fared well in its sustainability efforts and would see a further rating improvement in the coming year. 

StarHub was ranked marginally higher than Singtel for data privacy and security. This is due to StarHub’s lower number of major reported incidents, proactive surveillance and its transparent approach to resolving issues. 

The analysts add that both Singtel and StarHub have made big investments to beef up their commercial cybersecurity capabilities in the past six years and are well-placed to capture the strong demand in Singapore and Asia Pacific.

The cybersecurity revenue for Singtel and StarHub grew to $564 million and $221 million respectively in CY20. This represents 8% and 14% of Singtel Singapore and StarHub’s total service revenue.

While Singapore telcos are not big carbon emitters, the analysts say the environmental pillar may gain importance in the future, due to the telcos’ growing data centre business and the possibility of the government raising carbon tax higher than earlier indicated. 

In this front, the analysts ranked Singtel slightly higher than StarHub, as the former has set more ambitious targets towards net-zero carbon emissions by 2050. It also reports on broader environmental metrics. Climate-related matters constitute 20% of its ESG key performance indicators, which in turn have a 20% weight in the top management’s long-term incentives schemes.

While Singtel, StarHub and Netlink Trust have all played their role to narrow the digital divide, CGS-CIMB’s analysts say Singtel is a clear leader for driving financial inclusion and positioning itself for future opportunities in digital financial services. 


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Aside from its Dash e-wallet, Singtel is also part of a Grab-led consortium that has secured a digital full-bank license in Singapore. The analysts add that the Grab-Singtel consortium is also a front runner to securing a digital banking license in Malaysia, which may be issued in 1Q22F. 

As at 3.47pm, shares in Singtel and StarHub are trading flat at $2.49 and $1.23 respectively. Meanwhile, shares in Netlink Trust are trading at 0.5% lower at 9.85 cents. 

Photo: Bloomberg