• Mr Yuen Kuan Moon appointed as SingTel Group CEO-designate; to start from 1 January 2021.
• Under Mr Yuen, SingTel's Singapore Consumer business has performed quite well despite TPG threat.
• Maintain BUY with unchanged Target Price.

Ms Chua Sock Koong Has Decided to Retire as SingTel Group Chief Executive Officer on 1 January 2021

• The SingTel (SGX:Z74) Board has appointed Mr Yuen Kuan Moon to succeed her as the Group’s CEO.
• Mr Yuen, currently the CEO of SingTel’s Singapore Consumer Business and the Chief Digital Officer, is a SingTel veteran who joined the Group in 1993. He has risen through the ranks of the company, with leadership positions in marketing, business development and sales, and Telkomsel in Indonesia, before his appointment as CEO, Consumer Singapore in 2012. He has been appointed GCEO designate and will assume the role of Group CEO upon Ms Chua’s retirement.
• Ms Chua will stay on as Senior Advisor to the Chairman to assist with the transition.

Mr Yuen Needs to Improve Execution in Australia and Speed Up Asset Divestments, in Our View

• SingTel’s core business performance and the stock price has been quite weak, especially over the last two years. An internal GCEO-designate may not disrupt the existing organisational structure and can be functional rather quickly. This is in the best interest of the company given a clear intention to divest Optus towers and its digital advertising business.
• The challenges have been on the execution side – Optus’s underperformance compared to Telstra and a slow pace of divestments, which needs to be tackled by the GCEO-designate. Mr Yuen is a promising leader who has delivered far superior performance for SingTel’s Singapore Consumer business compared to the core business in Singapore and Australia. For example, Singapore Consumer business’s operating profit has been stable despite TPG’s threat compared to the overall core business’s operating profit declining by 14% annually over FY18-20 as shown below.

Singtel’s Stock Price Has Been Weak Over the Last Week Primarily Due to Profit Taking on Bharti’s Stock

• Bharti’s stock price was impacted after Jio launched aggressive post-paid price plans in India. However, Bharti’s share price correction may be overdone as post-paid users (~10-12% of total subscriber base in India) tend to be less price sensitive and care more about network quality, an area where Bharti is better-placed than its peers. Bharti accounts for over one-third of our SingTel valuation.

Maintain BUY With a Target Price of S$2.69

• Our fair value for SingTel's core business is S$0.48 per share based on peer multiples. SingTel's associates are worth S$2.49 per share based on their market values. After applying a 10% holding company discount, SingTel's associates are worth S$2.21 per share.

Source: DBS Research - 2 Oct 2020