Singtel Upgraded to Buy by DBS as Bharti Airtel Gains Value, May 29

DBS Research upgraded Singtel to a buy rating on May 26, raising its 12-month price target to S$5.46 from S$5.36. The upgrade reflects higher valuations of Bharti Airtel, Singtel’s 27.5% stake in the Indian telco. Singtel stock traded at S$4.38 on May 29, down 2.2% for the day. With Meyka rating the stock B+ and analysts targeting S$5.46, the data suggests 25% upside potential.

Why DBS Upgraded the Stock

DBS raised its fair value estimate for Bharti Airtel to 2,300 rupees per share from 2,000 rupees. Bharti Airtel accounts for 49% of Singtel’s total valuation and 64% of its regional associate segment value. The upgrade also reflects a widening holding company discount to 17% from 7% in March, creating a valuation opportunity. Analysts at DBS expect Reliance Jio to file its initial public offering this year, potentially triggering industry-wide tariff hikes in India.

Growth Drivers Ahead

DBS projects Singtel’s operating company Ebit to grow 5% in FY2027, accelerating to 10% in FY2028. Optus, the Australian subsidiary, is expected to stage a strong recovery and support mid-single-digit group Ebit growth next year. The data centre business and NCS, Singtel’s growth engine, will continue driving expansion. GPU-as-a-service ramp-up and potential recovery in Singapore’s consumer business should fuel the FY2028 acceleration.

Near-Term Headwinds

Singtel’s FY2027 operating company Ebit growth faces pressure from weakness in Singapore’s consumer business amid industry consolidation uncertainty. The stock has fallen 13.5% over the past three months, trading at S$4.38 on May 29. Technical indicators show the RSI at 32.01, signalling oversold conditions. Despite near-term challenges, the S$5.46 target offers significant upside from current levels.

What This Means for Investors

Singtel trades at a 12.8x price-to-earnings ratio with a 4.2% dividend yield. The stock’s recent weakness has created a valuation gap, with the holding company discount widening to 17%. DBS raised its price target based on Bharti Airtel’s revaluation and expected industry tailwinds. The upgrade reflects confidence in Singtel’s regional assets and near-term catalysts, though Singapore consumer weakness remains a near-term risk.

Final Thoughts

DBS’s upgrade to buy and S$5.46 target suggest 25% upside from current levels. Bharti Airtel revaluation and expected Reliance Jio IPO provide near-term catalysts, though Singapore consumer weakness poses near-term risk.

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