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Sing Tel has a special dividend potential of Sg18 cents per share in the next 2 years, says Nomura

“We don’t expect a special at the upcoming FY13 result this May, but expect it for next year (FY14). The last ‘special’ was in FY11, and management then stated that the next one will be reviewed in 3-years, i.e. May-2014,” says Nomura Equity Research

For Sing Tel, based on various ‘cash-in’ and ‘cash-out’ sources over the next 24-months, there is up to Singapore 18 cents (per share of Singapore $1) special dividend potential (largely from its under geared balance sheet). But realistically another Singapore 10-12 cents is likely, which is an additional 3% yield to its current ordinary dividend yield of 5%.  This is according to a Quick Note from Nomura Equity Research. Sing Tel is important to investors in India as it has a 32.25% equity stake in Bharti Airtel.

 

“We don’t expect a special at the upcoming FY13 result this May, but expect it for next year (FY14). The last ‘special’ was in FY11, and management then stated that the next one will be reviewed in 3-years, i.e. May-2014,” says Nomura Equity Research.
 

While projecting future cash flows for Sing Tel, Nomura analysts predict Singapore $6 billion ‘cash-in’ and Singapore $2 billion ‘cash-out’ over the next two years. Divestment in NetLink Trust could realise around Singapore $1.4 billion. Spectrum payment in Australia of Singapore $1.5 billion (payment will be in FY15), and spectrum payment in Singapore of around Singapore $100 million are the major cash outflows.

 

The above scenarios result in a net ‘cash-in’ of Singapore $4.5 billion versus Nomura’s ordinary dividend estimate of Singapore $5.6 billion over the next two years (on 75% payout ratio). The cash flow projections for FY13 and FY14 are given in the table below:
 

On a futuristic note on Sing Tel, during its recent investor day, the company stated that “everything is zeroing into mobile, so mobile internet is the way to go” and that’s where SingTel is looking to capitalize on its 480 million regional mobile subscription. For this, Digital Life is a key growth focus for the group. So far, around Singapore $500 million has been invested across 32 businesses in seven countries at the group level.

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