SingTel's Exceptional Losses Mostly Non-cash; Maintain BUY

• SingTel (SGX:Z74) is booking a net exceptional loss of S$1.2b, of which 94% are non-cash impairments against its digital assets and Optus’ legacy network. The impairment is part of SingTel’s strategic review of its digital assets.
• Overall, the share price may experience some weakness in view of the exceptional losses announced. That said, it is all set for SingTel CEO Yuen Kuan Moon’s announcement of its long-term strategic direction, alongside with its results release in approximately 2 weeks’ time.
• We maintain BUY on with SOTP-based target price of S$2.88 as we see deep value in SingTel. The market is ascribing almost zero value to its SG and Australia operations, while SingTel offers 5.3% FY22E yield.

Cleaning Up Its Books

• SingTel is booking a net exceptional loss of S$1.2b. This includes impairment charges of S$589m and S$336m against its investments in AdTech Amobee and Cybersecurity business Trustwave.
• Concurrently, Optus has undertaken a review of its BHARTI (BHARTI IN, BUY, Target price: INR750).

Part of Its Strategic Review

• On the impairment against Amobee and Trustwave, the move comes amid COVID-19 Amobee and Trustwave are exposed to. Management foresees that growth will be pushed back by 1-2 years for Amobee.

More to Come

• Overall, the impairment exercise is part of SingTel’s strategic review to clean up its NCS could be one of the focus areas, as the company is now an autonomous unit, which reports directly to SingTel’s CEO. NCS was also mentioned during the investors’ conference as an area for growth.

Source: Maybank Kim Eng Research - 17 May 2021