On Monday, SGX-listed Singapore Telecommunications, or Singtel (SG:Z74) announced the divestment of a 20% stake in its regional data center business to the U.S.-based investment company KKR & Co. (NYSE:KKR). Under this deal, a fund managed by KKR will pay S$1.1 billion for this investment, resulting in an enterprise valuation of S$5.5 billion for Singtel’s entire regional data center business.
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The Singtel share price has gained around 4% in the last two days after the announcement of this news. Year-to-date, the stock has been trading down by 3.14%.
Singtel is a prominent telecommunications service provider in Singapore, offering a wide array of services to its customers. These services encompass fixed-line, mobile, internet, data, TV, and more.
The Deal Rationale
The deal marks Singtel’s first partnership with KKR and will help the company leverage the private equity firms’s vast experience in investing in data centers and telecommunications infrastructure on a global scale. Singtel intends to utilize the cash from the deal in the expansion of its data center operations in Southeast Asia, including key markets like Singapore, Indonesia, and Thailand. Also, the company aims to explore new markets such as Malaysia.
According to Singtel, the Southeast Asia data center market is on the brink of a remarkable expansion, with a projected growth rate of 17% over the next five years. This deal places Singtel right in the middle to capitalize on this attractive opportunity and strengthen its leadership in the regional data center sector.
This deal also marks KKR’s biggest investment in the Southeast Asian data center market. It is worth noting that KKR will have the option to increase its ownership stake to 25% by 2027, based on an agreed valuation.
The deal is expected to be completed by the fourth quarter of 2023, after receiving the necessary approvals.
What is Singtel’s Price Target?
According to TipRanks, Z74 stock has been rated as a Strong Buy, backed by six Buy and one Hold recommendations by analysts. The Singtel share price target price is S$2.90, which is 24.1% higher than the current price level.
