Things are looking up for investors in Singtel (SGX: Z74).
The blue-chip telco has not only signalled that it may raise its dividends but has also committed to executing its strategic reset to grow the business.
Singtel held its Investor Day on the last day of August and disclosed its plans for the future, following the footsteps of its peer StarHub Limited (SGX: CC3) which held its Investor Day last December.
Here are seven highlights of what Singtel is planning for the next few years.
1. Driving growth for Singapore Consumer
Singtel is seeing positive trends emerge for its core Singapore Consumer division.
There has been a steady recovery in travellers as borders reopen and restrictions ease.
The foreign worker population is gradually returning and the telco sees increased demand for home connectivity and products for hybrid work.
Roaming volume was at around 55% of pre-COVID levels in July and Singtel is seeing higher active roamer penetration in its major markets of Malaysia and Indonesia compared to pre-COVID.
Total 5G subscribers have also risen to 480,000 in the fourth quarter of fiscal 2022 (ended 31 March), more than double the 200,000 two quarters ago.
Strategic goals for the division include driving further 5G adoption, refreshing its content line-up for its Cable TV segment, and boosting customer loyalty through the offer of attractive rewards.
2. Tapping on B2B growth for Optus
Australian subsidiary Optus has a strong market presence with more than 10.2 million mobile customers and a 33% mobile market share in the country.
The Australian telco has delivered strong results for fiscal 2022 (FY2022) with the addition of 273,000 customers and single-digit year on year growth in service average revenue per user (ARPU).
Optus sees a good opportunity to grow its business-to-business (B2B) division by implementing a strategy to cross-sell across different client segments.
It will also rationalise its product offerings and integrate and centralise its teams to reduce costs.
3. The regionalisation of NCS
Singtel’s B2B unit, NCS, intends to rise the post-pandemic wave across the Asia-Pacific region to regionalise the division.
It is relying on three main pillars of growth.
The first is to reinvent the public sector business and to push for growth in select client industries such as healthcare & transport, and communications & media.
Secondly, NCS will offer a suite of services by offering end-to-end capabilities.
Finally, the division will beef up its local business and then expand beyond Singapore into other geographies.
4. Building a regional data centre platform
Next, Singtel will focus on creating a regional data centre platform.
In Singapore, it is building a new integrated cable landing and data centre facility with a 60 megawatt (MW) pipeline.
In Thailand, the division will break ground for its first data centre in 2023 and the target is for it to be operational by 2024 or 2025.
Regional data centre demand is projected to rise by 18% per annum from US$2.5 billion in 2020 to US$5.7 billion by 2025.
Singtel’s goal is to become a trusted regional one-stop-shop with the establishment of its platform, while also operating one of the greenest data centre portfolios focused on sustainability.
5. Improving contributions from associates
Let’s not forget that Singtel also has a slew of associates that help to contribute their share or profits to the telco’s bottom line.
Two of them, Thailand’s AIS and the Philippine’s Globe, have comprehensive plans to grow their business.
AIS will focus on lifting ARPU through differentiation and growing its 5G adoption rates. It will also upsell premium content and services and offer an all-in-one package for its cable TV division.
Meanwhile, Globe recorded a new record for quarterly revenues in the first half of 2022 and will sell around 7,000 towers in the largest sale and leaseback transaction in the Philippines.
The Filipino associate plans to expand its digital ecosystem further to complement its core service offerings.
6. Digital bank ambitions
Back in December 2020, Singtel partnered with ride-hailing and food delivery company Grab (NASDAQ: GRAB) and clinched the Singapore digital full bank licence.
Fast forward to today, and the new digital bank from the Singtel-Grab consortium, GXS digibank, is gearing up for a public launch with an app release in early September.
Singtel also partnered with Grab and a consortium of Malaysian partners and was awarded a digital bank licence there in April this year.
The Malaysian digital bank is currently expanding its team and is working towards a launch.
In Indonesia, Singtel acquired Bank Fama in January this year and is planning to launch a digital bank there next year.
7. Increasing its return on invested capital
All these measures are targeted to drive an important financial metric – Singtel’s return on invested capital (ROIC).
ROIC stood at 5.4% for FY2022 and the telco’s mid-term target is to raise this to high single digits.
To do so, Singtel will attempt to grow its ARPU and ride on tailwinds from increased digitalisation to grow both its enterprise business (i.e. NCS) and data centres.
Investors need to be patient as the telco works to execute on multiple fronts, but there are signs that the group’s financial and operating metrics are slowly improving.
Looking for investment opportunities in 2022 and beyond? In our latest special FREE report “Top 9 Dividend Stocks for 2022”, we’re revealing 3 groups of stocks that are set to deliver mouth-watering dividends in the coming year.
Our safe-harbour stocks are a set of blue-chip companies that have been able to hold their own and deliver steady dividends. Growth accelerators stocks are enterprising businesses poised to continue their growth. And finally, the pandemic surprises are the unexpected winners of the pandemic.
Want to know more? Click HERE to download for free now!
Follow us on Facebook and Telegram for the latest investing news and analyses!
Disclaimer: Royston Yang does not own shares in any of the companies mentioned.