After a roller coaster of a year, Singapore Telecommunications (Singtel), is expected to post a net exceptional loss of $1.21 billion for its upcoming FY2021 ended March results which will be released on May 27, due to impairment charges from its investments in Amobee and Trustwave, as well as impairments and write-downs from Optus.

Despite Singtel’s negative guidance on its upcoming earnings, analysts are still upbeat on the stock and are confident that the worst could be over.

CGS-CIMB Research has kept its “add” call on Singtel with an unchanged target price of $3.10, as analyst Foong Choong Chen believes that Singtel is able to start FY2022 on a clean slate.

“We are not too concerned with the abovementioned items as they are mainly non-cash one-off charges, which should not impact Singtel’s underlying net profit. While the book values of Amobee and Global Cyber Security Business (GCSB) have been lowered, our SOP valuation for Singtel is unaffected, as we have never factored them in, to be conservative,” says Foong.


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“The charges also appear to be a kitchen-sinking exercise to clear the deck before Singtel’s new Group CEO, Yuen Kuan Moon (appointed on Jan 1), steers the group into FY2022,” he adds.

On a positive note, Singtel says it has embarked on a strategic review to consider options to sharpen its focus and ensure Amobee and GCSB are positioned for growth, which may include a full/partial divestment or business combinations with other industry players.

“We believe this indicates that the new management team might take a more proactive approach towards monetising these investments in the coming 12-24 months (either via IPOs, outright sales or partial divestments to illuminate their values),” adds Foong.

Meanwhile, Maybank Kim Eng is keeping its “buy” recommendation on Singtel with a target price of $2.88.

“The share price may experience some weakness in view of the exceptional losses announced. That said, it is all set for Singtel CEO Yuen Kuan Moon’s announcement of its long-term strategic direction, alongside with its results release in approximately two weeks’ time,” says analyst Kareen Chan who also sees deep value in Singtel.

The analyst also notes that the market is ascribing zero value to Singtel’s Singapore and Australia operations, while the stock offers a 5.3% FY2022 yield.


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“Overall, the impairment exercise is part of Singtel’s strategic review to clean up its digital assets and focus on growth thereafter, in our view. The exceptional charges are mainly non-cash, so they do not derail our DCF-based valuation of Singtel’s core business. Its long-term growth strategy is likely to be revealed during results in approximately two weeks’ time. We think NCS could be one of the focus areas, as the company is now an autonomous unit, which reports directly to Singtel’s CEO,” says Chan.

Similarly, RHB Group Research sees this development as timely considering the operational and industry challenges plaguing Singtel’s digital/adjacent assets, especially over the past two years.

“This looks to be a kitchen-sinking exercise by the new leadership (headed by new Group CEO, Yuen Kuan Moon) to start with a clean slate via the recalibration of group strategy,” says the RHB Research Team, while noting that the pandemic has impeded the group’s ability to scale both Amobee and Trustwave.

To that end, the research team recommends investors to use the share price pullback opportunity to “buy” and “accumulate” Singtel, which remains to be RHB’s preferred stock pick.

As at 2.20pm shares in Singtel are trading at $2.41 or 1.4 times FY21 book with a dividend yield of 4.6%, according to RHB’s estimates.