Singtel's Nxera data centre unit eyed for S$4.5 billion listing
UOB Kay Hian maintained its 'buy' rating on Singtel with a S$5.50 target price as the telco explores options for its regional data centre business, Nxera.
Nxera valuation estimated at S$4.5 billion
Singapore Telecommunications (Singtel) is evaluating strategic options for its data centre arm, Nxera, including a potential listing or a tax-efficient real estate investment trust (REIT). Analyst Chong Lee Len from UOB Kay Hian estimates Nxera could achieve an equity valuation of S$4 billion to S$4.5 billion if listed.
This assessment comes as UOB Kay Hian reaffirmed its 'buy' recommendation on Singtel, setting a target price of S$5.50 for the telco's shares.
Valuation based on FY2028 EBITDA
UOB Kay Hian's valuation for Nxera is based on an enterprise value (EV) multiple of 20 times its earnings before interest, taxes, depreciation, and amortisation (EBITDA). The projection anticipates Nxera's EBITDA to surpass S$300 million by the end of fiscal year 2028.
Nxera is on track to operate over 230 megawatts (MW) of data centre capacity across Singapore, Indonesia, and Malaysia by the close of fiscal year 2027. Its development pipeline suggests total capacity could eventually exceed 460MW.
Singtel seeks higher returns from digital assets
Singtel is actively pursuing enhanced returns from its diverse portfolio, which includes its Australian subsidiary Optus, its data centre operations, and its growing artificial intelligence (AI) infrastructure. The company is currently in the initial stages of assessing these strategic avenues for Nxera.
This move aligns with Singtel's broader objective to unlock value from its assets and capitalise on the increasing demand for digital infrastructure across the region.
Singtel's exploration of a Nxera listing signals a potential catalyst for its share price, offering investors a clearer valuation of its digital infrastructure assets. A successful spin-off could also provide a benchmark for other regional telcos with similar data centre portfolios.
The estimated valuation reflects strong investor appetite for high-growth data centre businesses, particularly those with significant capacity in key Southeast Asian markets like Singapore, Indonesia, and Malaysia.
This article is journalism, not investment advice; consult a licensed professional before making financial decisions. Market data is indicative, may be delayed, and should be verified with your broker or exchange before use.
Comments.
Comments are moderated. We remove what is unlawful, abusive or off-topic, and and you remain responsible for what you post.
Reader comments open soon. Until then, corrections and responses go to our newsroom, and we publish what we get wrong on Corrections.