SINGAPORE (Feb 10): UOB Kay Hian is keeping its “buy” recommendation on Singapore Telecommunications (Singtel) with a target price of $4.53 following a “rock solid” performance in 3Q.

Singtel saw earnings increase to $972.8 million in 3Q, an increase of 2.0% from $953.5 million a year ago. Underlying net profit grew 4.2% to $994 million in the quarter ended Dec 31, 2016

(See Singtel 3Q earnings up 2% to $973 mil)

In a SGX filing on Thursday, Singtel said its “resilient” 3Q performance was due to a strong core business and higher contributions from regional mobile associates.

“Singtel will benefit from growth at its regional mobile associates, such as Telkomsel in Indonesia, Bharti Airtel in India, Advanced Info Service in Thailand and Globe Telecom in the Philippines,” says UOB analyst Jonathan Koh in a Friday report.

“Singtel is the least affected by a fourth mobile operator in Singapore as overseas businesses accounts for about 70% of its bottom-line,” Koh adds.

In addition, Singtel is also preparing for an initial public offering to divest more than 75% of its wholly-owned fibre broadband network unit NetLink Trust.

With Singtel management having indicated that it would return a portion of the IPO proceeds back to shareholders, Koh says Singtel would be able to pay shareholders up to 17.5 cents per share in a special dividend, assuming NetLink Trust was valued at $3.8 billion.

(See Singtel hires three banks for share sale of fibre broadband unit)

UOB’s target price of $4.53 represents an upside of around 16% from the current price.

“Singtel is the largest and most liquid defensive stock listed on the Singapore Exchange and deserves to trade at a premium,” Koh says.

As at 1.11pm, Singtel is trading 2 cents higher at $3.90.