Highlights

• Singtel delivered robust 1QFY27 underlying net profit of S$831m (+21 yoy), driven by higher Airtel and AIS contributions and growth in Optus, NCS and
  Digital Infraco. Results are in line with expectations. 
   
• The Singapore market saw price competition, leading to a 2% yoy decline in EBIT. Optus ARPU uplift yielded positive results that will flow through into
  2QFY27.  
   
• Maintain BUY with an SOTP-based target price of S$5.50.
   

Analysis

• Strong 1QFY27 performance. Singapore Telecommunications (Singtel) reported underlying net profit of S$831m (+21 yoy), in line with house and
  street estimates.  The quarter saw: a) 10% yoy opco EBIT growth from Optus, NCS and Digital Infraco; and b) 15% yoy increase in associate
  earnings. Singtel Singapore EBIT fell 2% yoy, reflecting intense price competition, partly offset by lower depreciation. 
   

• Optus: ARPU uplift to sustain into 2QFY27. On a constant currency basis, 1QFY27 operating revenue fell 2% yoy on weaker device sales. That said,
  service revenue rose 3% yoy on the back of ARPU uplift (effective May 26). The higher service revenue, lower depreciation and overall cost discipline
  led to EBIT growth of 14% yoy to A$152m. Postpaid and prepaid subscribers declining by 39,000 and 14,000 qoq, respectively. 
   
• Singapore: Intense mobile competition. 1QFY27 mobile service revenue fell 4% yoy given intense price competition. Increase in data and internet
  was offset by decline in mobile, ICT and legacy services. Overall, EBIT fell 2% on lower depreciation charges. Blended ARPU was stable qoq at
  S$22/month with a net add of 51,000 subscribers in the quarter. 
   
• NCS: Orderbook remains healthy. NCS reported 1QFY27 revenue and EBIT growth of 10% yoy and 29% yoy respectively. This reflects robust
  demand for digital resilience services. Effective cost discipline has led to its 1QFY27 EBIT surging 29% yoy. During the quarter, NCS secured new
  orders amounting to S$860m, book-to-bill ratio of 1.1x.  
   
• Digital Infraco: Strong revenue uplift of 19% yoy driven by the commissioning of Nxera’s DC Tuas (in Jan 26) and capacity deployment
  from RE:AI’s AI cloud service. EBIT rose 10% yoy after including higher depreciation charges with the commissioning of DC Tuas. 
   
• Regional associates: Strong performance from Airtel and AIS. Airtel group reported a 39% yoy jump in net contribution, driven by India mobile
  ARPU uplift of 5%, and record subscribers net add in the quarter. AIS recorded a 33% increase in net contribution, supported by higher mobile and
  broadband service revenue, cost discipline and lower depreciation. Globe’s net contribution fell 9% yoy. Despite healthy demand for data usage and
  connectivity, earnings were dragged down by elevated depreciation and finance costs. Telkomsel’s net contribution rose marginally by 2% yoy as
  price competition was stable in the quarter. That said, we note that price competition has been intense in Jul 26.