• Potential in Enterprise business
• Little threat from 4th SG telco, if any
• Value emerging below S$4

Singtel Investor Day 2015

Singtel held its Investor Day 2015 on 3 Jun, where analysts and investors got to meet and get updates from both Singtel management as well as management teams from their regional associates. From the breakout sessions with the various associates, we were able to get a better sense of the operating environments as well as their strategies to grow their businesses and capitalize on changing consumer behaviors in the various countries.

Sees more potential in its Enterprise business

The presentation kicked off with a presentation of its Enterprise business, its enhanced capabilities and strategy to harness the potentials in this segment – namely in Cyber Security, Enterprise Cloud and Singapore‟s Smart Nation program. As a recap, Singtel had earlier guided for its ICT revenue to grow by mid-single digit level in FY16, versus +6% in FY15. It had also guided for the group revenue to increase by mid-single digit level; EBITDA to increase by low single-digit level.

Downplays threat from 4th telco in Singapore

Over in its Consumer business in Singapore, Singtel has downplayed the threat from the emergence of a fourth telco in Singapore. Although two companies – Consistel and MyRepublic – have expressed interest, it notes that both of them do not have any experience in running a mobile network/business. Management notes that the outcome could also depend on several factors, including IDA‟s auction (likely in 2H15), a level playing field and level of investment (scale of a few hundred million). Market watchers believe that a new entrant would be able to garner less than 10% of market share from the incumbents; but do not rule out a near-term disruption in pricing.

Upgrade to BUY with new S$4.40 FV

Separately, Singtel‟s share price saw a pretty steep correction over the last week or so, falling to as low as S$3.91 on Wednesday, in line with the sell-off in the broad market. But we believe that value is emerging (especially below S$4) and as we adjust our SOTP-based fair value up from S$4.31 to S$4.40 to reflect the higher prices of its listed associates, we also upgrade our call to BUY.

Source: OCBC Research - 5 Jun 2015