SINGAPORE (June 17): Phillip Capital continues to rate Singtel a “buy” with an unchanged target price of $3.66, while keeping the stock as its top pick in the telecommunication sector.

This comes on the back of Singtel hosting its Investors Day 2019, where the group’s management gave updates on its various business segments and showcased new abilities.

These capabilities ranged from payment solutions, Internet of Things (IOT), prepaid Electronic Know Your Customer (eKYC) and Singapore’s first 24/7 unmanned pop-up store, UNBOXED.

On the group’s other business segments, a recovery of its regional associates is believed to be on track.

In India, Bharti Airtel expects average revenue per user (ARPU) to revert to a few years ago, at approximately 200 Rupees ($3.92).

In a Monday report, analyst Alvin Chia says Bharti's competitor Reliance Jio Infocomm is unlikely to reduce pricing.

Jio, a new telco backed by Reliance Industries, had been driving down prices since entering the Indian market in 2016. With Jio now having acquired a market share similar to Bharti’s, competition is expected to be more rational following, says Chia.

In Indonesia, Telkomsel expects the local competitive dynamics to improve, with a decrease in legacy services – SMS and voice calls – expected to be less impactful.

“Regulators have limited five SIM cards per operator instead of three. This will help reduce churn,” says Chia.

In Thailand, Advanced Info Services (AIS) expects core service revenue to grow mid-single digit underpinned by demand for 4G and handset campaigns.

In Australia, Optus added 379,000 post-paid subscribers in FY19 due to a line-up of exclusive content. Management estimated that 20% of customers shift to Optus for its sports content. The subscriber growth is also aided by competitive pricing and heavy capital expenditure on its mobile network. Optus is now regarded as a premium network by Australians.

Over in Singapore, the window of opportunity for newcomer TPG is seen to have narrowed considerably.

“When [TPG’s] license was issued in 2016, there was a huge unaddressed opportunity in the SIM-only segment. Mobile Network operators (MNOs) and Mobile Virtual Network operators (MVNOs) have now closed the gap through recent revisions of their offerings," Chia says.

“The revisions have specifically targeted the SIM-only segment which we expect TPG Telecom (TPG) to contest in,” he adds.

Meanwhile, Chia points out that Singtel has plans to monetise its digital business Amobee within the next three years either through an IPO or private investors. The management has guided for group digital life to narrow its losses and for EBITDA to improve.

"Amobee plans to derive majority of revenues from its scalable programmatic business, drive double-digit top line CAGR over the next three years and leverage on access to data to provide best marketing outcome for its clients," chia says.

As at 12.25pm, shares in Singtel are trading 0.3% down at $3.32, or 1.8 times FY20 book with a dividend yield of 5.3%.