Bullish long term outlook for$SINGTEL(Z74.SI)$ 

Singtel has risen 17% YTD excluding dividends, outperforming STI by 13%. Singtel's rise was powered by (i) 19% rise in Bharti's market cap which comprises 44% of Singtel valuation, and (ii) a reduction in the Holding Company (HoldCo) discount to 30-31% from 38-40% in Jan 2022.

Mobile service revenue growth is projected at 6% in 2023, led by tourists and 5G, similar to the growth rate in 2022. Singapore has witnessed a sharp recovery in tourist arrivals, but the number of tourists in Oct 2022 is still half of pre-pandemic levels. 5G penetration of post-paid users is projected to double to 40% in 2023 with 5G commanding 15-20% premium over 4G pricing. SIMBA (TPG) could become an acquisition target during 2023 as its cash flow may remain negative for another few years due to the 5G capex cycle.

Singtel's 31% Holding Company (HoldCo) discount could normalise to 10-15% as seen before 2018. The current HoldCo discount at ~31% has narrowed from 38-40% mainly due to (i) stabilisation of core operating from Singapore and Australia in 1HFY23 after 4-years of sharp decline and (ii) focus on special dividends on top of regular dividends. An absence of English Premier League (EPL) costs alone is likely to benefit Singtel's core operating profit by 2% or S$25-30m annually. With further recovery in its core operating profit, HoldCo discount is expected to narrow to 10-15% which was the case when core operating profit was stable before 2018.