Singtel

Singtel: Up 1.3% at S$3.23, outperforming after Indonesia's Telkom says it's mulling buying back shares of unit Telkomsel from SingTel, which owns 35% of the mobile network operator. CIMB says a sale would be positive for SingTel's shareholders as proceeds from the sale are likely to be returned to them. Assuming a price of US$8.5b (or $10.1bi), note that sale would raise a hefty $0.70/SingTel share…..

However, house reiterates its Underperform call on SingTel and urges investors to sell into expected strength on any sale news. Note that any acquisition may take time and SingTel's share price could be de-rated after the initial euphoria. Lastly, even if Telkom acquires Telkomsel at a 30% premium, house SOP valuation for SingTel would only rise by $0.15/share or 5%. SingTel continues to face competitive headwinds in Australia, margin pressure in SG and earnings drags in India, in house view