Why Singtel is selling so well

Lee Kah Whye Singapore, Aug 29 (ANI): A day after last week reporting financial results for the first quarter of 2022, Singtel sold its 3.3% stake in India’s Bharti Airtel Ltd to Bharti Telecom Ltd on Aug 25. announced. Approximately US$1.61 billion in total.

Southeast Asia’s largest telecom operator by market capitalization said the proceeds from the sale could be used to reduce the group’s debt and fund 5G capex and growth initiatives.

This is surprising given that Airtel’s financial performance was one of the two main reasons for its profit jump of over 41% in the financial quarter ended June. Airtel’s pre-tax contribution to Singtel’s profit increased by 145.6% from SGD 64 million (USD 46 million) to SGD 156 million (USD 112 million). It is the only regional Associate with increased revenue compared to the same period last year.

However, a closer reading of the memo contained in Singtel’s first quarter business update filed with the Singapore Exchange reveals that Airtel’s performance was driven by an exceptional gain from a one-off item. became. This includes fair value gains from the revaluation of foreign currency convertible bonds and the recognition of deferred tax credits in Africa.

Another reason for the surge in earnings is the sale of a 70% stake in Australian Tower Network (ATN) for S$1.87 billion (US$1.35 billion) in November 2021 during this reporting quarter. partially recognized. This temporarily earned him a profit of S$84 million (US$60.5 million). Singtel is amortizing his 30% of the profits from the sale of his ATN over 20 years.

At the operational level, Singtel’s performance has been disappointing. Operating income decreased 5.6% compared to the same quarter in 2021 to S$3,584 million (US$2,580 million).

It’s no surprise that Singapore’s telcos are cutting assets. When current CEO Yuen Kuan Moon announced his new strategic vision in May 2021, five months after taking office, he said the new direction would “capture the untapped digital growth of the 5G era, It’s designed to sharpen focus and improve shareholder value.” To this end, the company will “leverage its 5G leadership to revitalize its core consumer and enterprise businesses, develop new growth engines in ICT and digital services, and invest in quality infrastructure assets. to unlock the value of.” The sale of ATN was the first. A big step towards unlocking the value of your infrastructure assets. In announcing the sale in November 2021, the company said, “Funds will be used for Singtel’s 5G rollout, expansion of technology services, NCS’ digital services business, and other growth initiatives.” Telecommunications technology services division, providing consulting, digital technology and cybersecurity services and solutions throughout the Asia-Pacific region.

Bloomberg sources reported last week that Singtel was in the process of selling Chicago-based cybersecurity business Trustwave Holdings. The sale could raise $200 million to $300 million for him.

The company had purchased a 98% stake in Trustwave for US$810 million in 2015. Trustwave continues to lose money and Sintel has booked his US$250 million non-cash impairment charge against this investment in May 2021. However, in October 2021, he sold SecureTrust, a payment card industry compliance business, for his US$80 million.

In another loss-making exercise, Amobee was sold to New York-based ad tech firm Tremor International in July of this year for a total of US$239 million. The company outperformed the market in 2012 when he acquired Amobee at his US$321 million valuation. At the time, he said this was to increase the share of digital consumers’ wallets and shape the digital ecosystem.Founded in 2005, Amobee provides mobile advertising solutions to operators, publishers and advertisers around the world. is a rapidly growing provider of

Singtel’s future asset disposal plans extend beyond Trustwave. Bloomberg also reported that it is considering options that include the potential sale of a stake in the fiber assets of its Australian subsidiary, SingTel Optus.

DBS analyst Sachin Mittal told the Singapore business newspaper Business Times in July that the sale of Trustwave and Amobee would allow Singtel to avoid an estimated annual operating loss of S$200 million to S$210 million. Said he was looking forward to it.

The stock market appears to be appreciating the telecom company’s asset cuts. The company’s stock has risen since news of its plans broke in July. On June 17th he hit a six-month low of SGD2.41 before rising about 10% and last Friday he closed at SGD2.65 on August 26th.

Mittal raised its price target on Singtel from S$3.20 to S$3.24, maintaining a ‘buy’ call on the stock.

“Among the regional telcos, Singtel is growing significantly better than other dividend-paying telcos,” Mittal said. “Our core business segment was hit during the Covid lockdown, but is gradually recovering.” Singtel sold assets to streamline its portfolio and raise cash to focus on its 5G business, It seems that they are developing new growth engines including IT services and data centers.

In a business update released on August 24, Singtel CEO Yuen Quang Moon said, “This series of positive results will strengthen our core, unlock the value of our assets and create new “It reflects our progress on a strategic reset designed to grow our digital business.”We expect the business environment to remain challenging amid rising inflation and interest rates. As continued geopolitical tensions further impact global supply chains, and if our costs and revenues are to be further pressured, we must remain agile and address these realities. .” (Ani)