SingTel - Maybank Research 2022-09-29: Fairest Of Them All

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SINGTEL (SGX:Z74)

SingTel - Fairest Of Them All

Highest ESG rating among Singapore telcos

• We have introduced an enhanced ESG tear sheet for SingTel (SGX:Z74) and assigned it an above-average overall score of 85. Refer to the report attached below. This is the highest ESG rating within the SG telco sector, based on the group’s aggregated quantitative and qualitative/target-based metrics.
• SingTel is committed to improve the group ROIC to a high single digit while protecting its ability to pay sustainable dividends. See SingTel's Dividend History.

Leading ESG traits

• SingTel displays a very high degree of transparency in its ESG disclosures and there are no major compliance issues, as far as we can assess. SingTel's overall ESG score is 85, which is above average on our ESG rating (average ESG rating = 50), and it is one of the highest among telcos in our coverage.

Financed emission targets to establish

• Among its ESG goals, SingTel targets a 25% reduction in Scope 1 and 2 GHG emissions by 2025 from its 2015 baseline. Against this target, the telco has thus far achieved a 3.3% reduction.
• In FY22, SingTel identified 15 categories of indirect GHG (Scope3) emissions from its value chain. There is, however, no mention of its progress on sustainable financing target for which it should be looking to establish a baseline soon.

Higher ROIC targets and sustainable dividend yield

• SingTel expects to improve its ROIC to a high single digit in the next 2-3 years, up from 5% in FY22. Refer to the earlier report: SingTel - Maybank Research 2022-09-06: Driving Return On Invested Capital (ROIC) Higher. Proceeds from asset recycling (S$5b earmarked from partial stake sale of Bharti, Optus tower and monetisation of Singtel HQ) would be used to cover incremental 5G capex in Australia and current growth engines (regional data centre, NCS).
• We like SingTel’s ability to pay sustainable dividends.
• See
  • SingTel's Share Price,
  • SingTel's Target Price,
  • SingTel's Analyst Reports,
  • SingTel's Dividend History,
  • SingTel's Announcements,
  • SingTel's Latest News.
• With stronger core operating cashflows and an expected earnings recovery, we expect SingTel's future dividends to grow in line with earnings, at 70-75% payout ratio as compared to its dividend policy of 60-80% of underlying net profit.

Kelvin Tan Maybank Research | https://www.maybank-ke.com.sg/ 2022-09-29

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