[SINGAPORE] Singapore’s public listing drought has left investors searching for any sign of life in the markets.
It is understandable, then, that the potential listing of Singapore-based virtual telecommunications player Circles.Life on the Singapore Exchange (SGX) gave rise to some excited chatter.
Rameez Ansar, chief executive officer and co-founder of Circles, told media last month that the telco was mulling an initial public offering (IPO) here, while the parent company could list on the Nasdaq in New York.
Circles is backed by investors including private equity firm Warburg Pincus and the investment arm of Singapore’s Economic Development Board, EDBI.
Ansar said all business lines under Circles have reached breakeven, and noted that the company has a two-year target to reach “world-class” business metrics that would support its stock market performance.
He did not provide a specific timeline for when the IPOs might happen – if at all – saying that it will depend on market conditions and regulators in Singapore and the US.
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But the bigger question might be if there is investor appetite for another telco in the public markets.
Singing in the rain
Temasek-owned communications technology conglomerate Singtel is the biggest player here, and holds a clear advantage over the competition.
On top of the telco business, it operates next-generation connectivity, digital infrastructure and digital businesses in the region, including data centre arm Nxera and IT services unit NCS.
Singtel also owns Optus – the second-largest telecommunications company in Australia – and holds significant stakes in telco associates in India (Bharti Airtel), Indonesia (Telkomsel), the Philippines (Globe), and Thailand (AIS).
For the full year ended March, Singtel logged a net profit of S$4.02 billion, more than five times higher than the S$795 million in earnings recorded the year before. This was boosted mostly by a net exceptional gain of S$1.55 billion, on the back of the partial divestment of its Comcentre headquarters in Singapore.
Underlying net profit rose 9 per cent to S$2.47 billion for the full year, driven by robust performances from Optus, NCS, as well as regional associates Airtel and AIS.
In constant-currency terms, the underlying net profit would have been up 11 per cent year on year.
DBS Group Research analyst Sachin Mittal expects the value of Singtel’s core businesses in Singapore and Australia – excluding its associates – to grow by more than 300 per cent over the next 12 to 18 months.
“We project a core net profit compound annual growth rate (CAGR) of 10 per cent over FY2025 to FY2028, driven by growth in Optus, NCS and its data centre (business),” he said in a Jun 19 report.
“Optus and NCS are already contributing to core Ebit (earnings before interest and taxes) growth, while the data centre business is expected to see a significant rise in its contribution from FY2027 onwards,” he added.
DBS has a “buy” call on Singtel, with an increased target price of S$4.58 – implying a potential upside of 20.5 per cent from the stock’s closing price of S$3.80 on Wednesday (Jun 25).
Already, Singtel has been one of the best performers among Singapore blue-chip stocks so far this year, as investors flee to defensive sectors such as telecommunications, industrials, and utilities amid ongoing global uncertainties and volatility.
Year to date, Singtel has generated a total return – with dividends reinvested – of 23.4 per cent. In comparison, the benchmark Straits Times Index has returned 6.3 per cent over the same period.
StarHub, Singapore’s other listed telco player, however, has faltered.
Fading stars?
In contrast to Singtel’s outperformance, StarHub has registered a total return of minus 3.2 per cent year to date.
One reason might be that StarHub’s business is significantly smaller than Singtel’s.
For its full year ended Dec 31, 2024, StarHub posted a 7.3 per cent increase in net profit to S$160.5 million, from S$149.6 million the previous year.
Mittal, however, notes that the outlook for StarHub could be brighter ahead, as costs from its transformation programme to build a digital platform with multi-cloud capabilities taper off.
He said in a report on May 13: “StarHub incurred about 90 per cent of its total transformation costs of S$270 million in FY2024, with the residual 10 per cent to be spent in the first half of FY2025.”
“We project 12 per cent earnings CAGR over FY2025 to FY2027, and a yield of around 5 per cent in FY2025,” he added.
DBS has a “buy” recommendation on the stock. Mittal in the May report lowered his target price to S$1.38, from S$1.46 previously.
Meanwhile, pundits are also keeping an eye out for the impact from a potential merger between StarHub and M1, which was rumoured to take place by the end of this month.
“A potential merger between StarHub and M1 might significantly benefit Singtel’s Singapore business,” Mittal said. “This consolidation would ease the intense price competition, particularly in the mobile virtual network operator space, which has historically driven down average revenue per user across the industry.”
M1 was delisted from SGX in 2019 and its financials are no longer made public.
Clearly, investors tend to favour the larger listcos and blue-chips, especially amid the uncertainties.
How would Circles fare? Or any other small- to mid-cap players looking to list, for that matter?
Despite the chatter, there is unlikely to be a rousing reception from investors.
