Singtel: Strategic GDC Stake Deepens Data Centre Growth Platform With Limited Near-Term Earnings Impact

Analyst Paul Chew of Phillip Securities maintained a Buy rating on Singtel, retaining the price target of S$5.35.

Paul Chew has given his Buy rating due to a combination of factors tied to Singtel’s strategic expansion in the data centre space and its limited near-term financial downside. He highlights that the acquisition of a 25% stake in ST Telemedia Global Data Centres (GDC), alongside KKR, significantly enlarges Singtel’s data centre footprint across 12 countries, improving its geographic diversification and resilience for customers. Despite GDC currently being loss-making and the deal having less than a 1% impact on Singtel’s net earnings in the near term, the transaction is structured to be funded through a mix of internal cash and debt, thereby avoiding shareholder dilution. The purchase valuation appears demanding on current EBITDA metrics, but Chew sees this as justified by the underlying growth pipeline and long-term strategic benefits.

Paul Chew also underscores the sizeable growth runway from GDC’s project pipeline, which could potentially triple its current power capacity, concentrated largely in underpenetrated Asia-Pacific markets where demand for data centre services is rising. He expects this expanded capacity to translate into future earnings and cash flow growth, particularly as new facilities are completed and utilization increases. Additionally, he notes an option to crystallize value over time through a possible listing of selected Asian data centre assets, which could unlock higher valuations. Given these growth prospects, minimal immediate earnings drag, and the role of GDC as a key growth platform beyond Singtel’s ST28 strategy, he maintains a positive stance on the stock and supports a Buy recommendation.

Chew covers the Technology sector, focusing on stocks such as Venture, Adobe, and Microsoft. According to TipRanks, Chew has an average return of 22.0% and a 68.54% success rate on recommended stocks.

In another report released yesterday, DBS also maintained a Buy rating on the stock with a S$5.71 price target.