Executive Summary

Singapore Telecommunications Limited or Singtel (SGX: Z74) has experienced a notable share price re-rating after nearly a decade of underperformance, following a period in which investors questioned its ability to translate scale and assets into consistent shareholder returns. The shift in market sentiment has coincided with the introduction of the Singtel28 strategy, which emphasises disciplined capital allocation, asset recycling, and clearer shareholder return mechanisms.

This article examines what has changed in Singtel’s business and capital management approach, the drivers behind its recent earnings and dividend improvements, and the key risks that could shape future performance. Readers will gain a structured understanding of Singtel’s evolving profit engines, dividend framework, and valuation considerations following its recent re-rating.

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A Decade of Stagnation and the Loss of Investor Confidence

For much of the past decade, Singtel was widely regarded as a stock with strong underlying assets but limited ability to convert that value into sustained per-share growth. Despite its dominant domestic position, regional associate stakes, and scale advantages, investors increasingly viewed the group as inefficient in capital deployment and inconsistent in shareholder returns.

This erosion of confidence resulted in a prolonged valuation discount. While value existed within the group, markets questioned whether it could be reliably monetised in a way that improved earnings per share or dividends.

The recent share price recovery reflects a reassessment of this narrative rather than a sudden transformation into a high-growth company.

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Singtel28 and the Strategic Repositioning

The inflection point in Singtel’s market perception came with the launch of Singtel28 in May 2024. Rather than focusing on scale alone, the strategy reframed Singtel as a disciplined capital allocator with explicit targets for shareholder returns.

Under Singtel28, the group articulated three strategic pillars. Core connectivity businesses, including Singtel Singapore and Optus, are positioned as stable and cash-generative anchors. Growth is expected to come from higher-quality platforms such as NCS and digital infrastructure under Nxera. Crucially, capital recycling and shareholder distributions were formalised as a central component of the strategy, with clear targets and mechanisms.

This repositioning reduced uncertainty around how profits are generated and how excess capital is returned, which was instrumental in the subsequent re-rating.

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Earnings Momentum in FY2025 and H1 FY2026

Singtel’s FY2025 results provided the first substantive validation of the new strategy. For the year ended 31 March 2025, the group reported headline net profit of S$4.02 billion, supported by exceptional gains from asset monetisation. More relevant for ongoing performance, underlying net profit rose 9% year-on-year to S$2.47 billion.

The positive momentum continued into the first half of FY2026. For the six months ended 30 September 2025, underlying net profit increased 14% to S$1.35 billion, indicating that earnings improvement was not solely driven by one-off events.

These results reinforced the view that Singtel’s operational and capital discipline had begun to translate into more consistent earnings outcomes.

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A Two-Tier Dividend Framework

Singtel’s revised dividend structure is a key element of its strategic shift. Shareholder returns are now framed through two distinct components.

The core dividend is supported by underlying earnings and operating cash flow from the group’s stable businesses. In addition, Singtel introduced a Value Realisation Dividend, which distributes part of the proceeds from asset recycling activities.

This structure signals a departure from a single, static dividend model. While the value realisation component is inherently less predictable, it creates a clearer link between capital monetisation and shareholder returns, provided that asset recycling remains disciplined and repeatable.

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Capital Management and Asset Recycling

In May 2025, Singtel announced a S$2 billion share buyback programme to be executed through FY2028, with shares cancelled to enhance per-share metrics. Concurrently, the group raised its mid-term asset recycling target from S$6 billion to S$9 billion.

These actions underscored the central role of capital management in Singtel’s revised investment proposition. For a mature company, the ability to generate steady cash flow, unlock asset value, and reduce share count can meaningfully improve long-term shareholder returns without relying on rapid topline growth.

However, the sustainability of this approach depends on the quality of reinvestment decisions and the resilience of the underlying operating businesses.

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Core Operating Segments and Key Drivers

Singtel Singapore

The domestic business is positioned as a cash anchor rather than a growth engine. Stability and predictability are prioritised to support the core dividend, reducing reliance on volatile associate contributions or exceptional gains.

Optus

Optus remains the most significant swing factor within the group. While it contributes materially to earnings, repeated regulatory, governance, and operational incidents have heightened scrutiny. Even with improved profitability, ongoing compliance costs and reputational challenges could constrain valuation upside if operational stability is not sustained.

NCS

NCS represents a strategic growth platform under Singtel28. As an enterprise and public sector digital services provider, it offers a structurally different earnings profile from traditional telecom operations, with the potential to enhance earnings quality and growth.

Nxera and Digital Infrastructure

Singtel’s data centre and digital infrastructure assets under Nxera are being repositioned as monetisable platforms rather than purely internal utilities. The key question for investors is whether Nxera can deliver attractive returns on capital without becoming excessively capital-intensive.

Regional Associates

Progressive reductions in stakes, including in Bharti Airtel, have supported Singtel’s asset recycling objectives. While these sales unlock capital for dividends and buybacks, they also reduce long-term exposure to associate growth, placing greater importance on redeployment discipline.

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Valuation Considerations After the Re-Rating

Following its share price recovery, Singtel is no longer priced as a deeply discounted turnaround. Future returns are likely to be driven by three factors: dividend sustainability, incremental improvement in earnings quality, and per-share enhancement from buybacks and capital discipline.

The principal risk remains execution, particularly at Optus. Continued operational or regulatory setbacks could limit further valuation expansion, even if other business segments perform well.

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Conclusion

Singtel’s recent re-rating reflects a shift in how the market views its strategy, capital discipline, and shareholder return framework. The Singtel28 plan has provided clearer visibility on earnings generation and capital allocation, supported by tangible improvements in underlying profitability and dividend structure.

While the group is no longer a contrarian value play, its evolving profile suggests a transition toward a more disciplined, cash-generative compounder. The durability of this shift will depend on consistent execution, prudent reinvestment of recycled capital, and sustained operational stability across its key businesses.

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