SingTel: SingTel’s share price is expected to take a breather after a good run over the past 18 months. FY16 earnings growth is likely to be flattish given weaker regional currencies and dilution from the recent Trustwave acquisition, which will offset Optus’s stronger performance. The acquisition of Trustwave will enhance SingTel’s capabilities in the enterprise segment in the longer term as there is growing demand for cybersecurity services.
SingTel has also raised its accrued capex to $3.0bn in FY16 to enhance Optus’s mobile network, build a new SG data centre and upgrade its billing/customer care system. These should help SingTel remain competitive and drive future growth. However, higher funding costs and depreciation will weigh on earnings in the short term.
CIMB today has downgraded SingTel from ADD to HOLD with TP: $4.40, supported by decent 4.1-4.6% yields over FY16-18.
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