Singtel's (SGX:Z74) Valuation Post-Shareholder Returns Boost: A Case for Re-Rating?

Singapore Telecommunications (SGX:Z74) has emerged as a focal point for investors seeking stable returns in a volatile market, driven by its aggressive shareholder returns strategy and robust financial performance in 2025. With a final dividend of SGD0.10 per share and a SGD2 billion share buyback program announced in May 2025, Singtel has signaled its commitment to capital recycling and value creation. The question now is whether these initiatives, coupled with improved earnings, justify a re-rating of the stock's intrinsic value.

Financial Performance and Shareholder Returns: A Strong Foundation

Singtel's 2HFY25 results underscored its operational resilience. Operating revenue rose 0.8% year-on-year to S$7.2 billion, while EBITDA grew 1.9% to S$1.8 billion, maintaining a stable margin of 25.8%, according to OCBC Investment Research. A net exceptional gain of S$1.5 billion from asset disposals further boosted PATMI to S$2.8 billion, with underlying PATMI rising 12.3% to S$1.3 billion, per the same OCBC research. These figures, combined with a 5.4% EBITDA growth for the full year, position Singtel as a leader in the Asian telecom sector.

The company's shareholder returns strategy has been equally impressive. The FY25 dividend per share increased by 13.3% year-on-year, with a total payout of 17.0 cents, including a value realisation dividend of 3.3 cents, as noted by OCBC Investment Research. The SGD2 billion buyback program, funded by asset recycling proceeds, adds another layer of value creation, with the company raising its mid-term asset recycling target to S$9 billion under the Singtel28 growth plan, as reported by The Business Times.

Stock Price Reaction: Mixed Signals and Investor Sentiment

The market's response to these initiatives has been mixed. Following the May 2025 announcement of the dividend and buyback, Singtel's shares surged 3.6% to S$3.99, marking a five-year high, as noted by MiniChart. However, the stock's subsequent performance has been volatile, with a marginal 0.24% increase as of October 10, 2025, to S$4.26 . This volatility reflects investor uncertainty about the sustainability of earnings growth, particularly as future EPS are projected to decline by 15.9% over the next 12 months, according to Yahoo Finance.

Despite this, investor sentiment remains cautiously optimistic. The stock's 1-year total shareholder return of 42.6% and a 5-year return of 146% highlight its appeal, as the Yahoo Finance piece also noted. Analysts note that Singtel's focus on AI, data centres, and global connectivity-coupled with strong performances from subsidiaries like Optus and NCS-positions it for long-term growth, according to MiniChart.

Valuation Metrics: Undervalued or Overhyped?

Singtel's valuation appears to lag behind its fundamentals. As of October 2025, the stock trades at a P/E ratio of 11.1x, significantly below the Asian telecom industry average of 16.7x and the peer group average of 22.9x, a gap noted in OCBC's analysis. A discounted cash flow (DCF) model estimates its fair value at SGD6.53, implying a 34.7% discount to the current price, per the OCBC report. This suggests the market may be underappreciating Singtel's asset recycling efforts and improved profitability.

However, risks persist. Slowing revenue growth and short-term volatility could dampen investor confidence. While the consensus price target of SGD4.267 implies a modest 2.8% upside, according to The Business Times, Morningstar's valuation of SGD3.67, as reported by The Smart Investor, indicates potential overvaluation relative to fundamentals.

Conclusion: A Re-Rating Within Reach?

Singtel's recent shareholder returns initiatives and financial performance provide a compelling case for a re-rating. The combination of a robust dividend yield (5% expected for FY25, according to MiniChart), a substantial buyback program, and a DCF-derived fair value above the current price suggests the stock is undervalued. However, the re-rating hinges on the sustainability of earnings growth and the successful execution of the Singtel28 strategy. For investors with a medium-term horizon, the current valuation offers an attractive entry point, albeit with caution around macroeconomic and sector-specific risks.