Singtel’s Strategic Reset: 5 Highlights from its Latest Investor Day

Remember that Singtel made a significant change in its plans during the fiscal year 2022. During this period, the company's overall dividend of S$0.093 was 24% higher compared to the S$0.075 paid in the previous fiscal year, 2021.

The telecommunication company's most recent financial year 2023 outcomes were also promising as it distributed a larger base dividend of S$0.099 and announced an extra dividend of S$0.05.

Time goes by, and almost a year has passed since Singtel (SGX: Z74) organized its 2022 Investor Day.

In the past, the telecommunications company unveiled information about its extensive plan and goals as it organized its departments to stimulate progress.

Earlier this week, the esteemed organization unveiled the presentations for its most recent Investor Day 2023, outlining the groundwork for subsequent expansion.

We present five key takeaways from Singtel's recent Investor Day to assess their potential for further growth.

Growing With The Wind

To get started, Singtel's Chief Executive Officer Yuen Kuan Moon recognized a number of positive factors that he believes Singtel can take advantage of to achieve additional expansion.

In four of the six markets where Singtel operates, there has been a consolidation of telecommunication companies, resulting in an upward trend in prices.

He also observes optimistic developments in the industry, such as the increasing speed at which businesses are embracing digital transformation and the rise in revenues from roaming services.

Currently, the revenues generated from roaming in Singapore have increased by 33% and have bounced back to 65% of the levels observed before the COVID-19 pandemic. Furthermore, there is still more room for growth and improvement in the future.

In the meantime, Singtel will also make use of 5G technology by offering 5G services in various sectors including manufacturing, security, healthcare, and transportation.

In other areas, the team also discovered significant untapped possibilities in the markets of local partners when it comes to increased usage of broadband services.

In India and Indonesia, only a small percentage of the population, specifically 10% and 17% respectively, had access to broadband services. The broadband sector in India experienced a yearly expansion of 15% on average, while in Indonesia it grew at a rate of approximately 8% per year.

We mustn't overlook the fact that the Singtel-Grab digital bank, known as GXS Bank (NASDAQ: GRAB), commenced operations in August of the previous year. It has introduced both a savings account and a loan offering.

The launch of this bank in Malaysia and Indonesia is planned to happen before the year ends. The main objective is to achieve a breakeven point based on EBITDA (earnings before interest, taxes, depreciation, and amortization) by the fiscal year 2026.

Aim For High ROIC

Singtel aims to enhance its return on investment (ROI) in the long run.

To provide some background, the return on invested capital (ROIC) for FY2023 was recorded at 8%. The management has set a goal to raise this percentage to a figure in the low double digits by FY2026.

In order to achieve this, the team plans to enhance effectiveness for both Optus and Singtel Singapore departments and dispose of or shut down unprofitable ventures.

Simultaneously, the telecommunications company will decrease its capital intensity by allocating less expenditure.

Singtel is also aiming to obtain over 20% of its EBITDA from sources of growth like purchases, asset recycling, and outside capital by the end of the fiscal year 2028.

The present ratio sits at 12% and consists of local data centers and NCS.

Revive Consumer Business Vitality

At Singtel Singapore, they are planning to revitalize the main services offered by the group.

One effort aims to encourage the use of 5G technology for different occasions like the National Day Parade and the upcoming Formula 1 Race.

There are strategies in place to optimize the recovery of roaming charges and consistently enhance its internet services as a comprehensive source of entertainment.

These aspirations are ambitious and will require a considerable amount of time, extensive exertion, and resources to accomplish.

Creating A Seamless Optus Journey

Moving forward with Singtel's Optus department, there are strategies being implemented to merge the divisions catering to consumers and enterprises, aiming to create a unified and seamless experience known as "One Optus".

This endeavor will focus on small and medium-sized companies as well as bigger corporations and governmental organizations.

Optus has teamed up with SpaceX, a space vehicle producer established by Elon Musk, who is also the CEO of Tesla (NASDAQ: TSLA), to introduce direct-to-mobile LEO (low earth orbit) connectivity in Australia.

If this collaboration is a success, it will result in almost complete internet access throughout the entire country. The process will commence with the introduction of SMS services by the end of 2024, followed by the availability of voice and data services starting in late 2025.

This program also complements Optus' 5G network effectively and the department is making good progress on other LEO collaborations to expand this sector even more.

Creating A Green Data Hub For The Region

Singtel has a wide range of digital infrastructure assets throughout Asia.

These consist of information hubs, orbiting communication devices, linking cables, and a business infrastructure.

Specifically, there is an anticipation of a growth rate of over 20% per year in data centers located in Southeast Asia. This growth is fueled by the rapid advancement and implementation of digital technologies, the expansion of cloud services, and the rising utilization of artificial intelligence.

The expected increase in data centre availability in this area is forecasted to reach a Compound Annual Growth Rate (CAGR) of 19% until 2026.

In order to achieve this goal, Singtel is preparing to construct a green data centre platform on a regional scale.

With the collection of assets it currently owns and the upcoming addition of more data centers, the telecommunications company is expected to have a total capacity of over 200 MW.

Expansion can be attained by naturally expanding into fresh markets like Malaysia and Vietnam, alongside carefully chosen acquisitions.

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Note: Royston Yang does not possess any stocks in the aforementioned companies.