Is There Still Value Left in Singtel?

Singapore Telecommunications Limited or “Singtel” is one of the largest telecommunication companies in Asia with operations mainly in Singapore and Australia. Its business can be segregated into 5 business units:

  1. Singapore Consumer
  2. Australia Consumer
  3. Regional Associates
  4. Group Enterprise
  5. Group Digital Life

On 14th May 2019, Singtel reported its earnings for the 4th-quarter and financial year ending 31 March 2019. Here are a few highlights to take note:

  • Operating revenue was up 0.6% y-o-y to S$17.37 bn but EBITDA declined 7% to S$4.69 bn due to lower margins.
  • Associates pre-tax earnings also came in 37% lower to S$1.53 bn over the same period The drag is primarily due to Bharti Airtel in India, where the telecom industry is facing a price war triggered by the entry of Reliance Jio Infocomm.
  • Inclusive of exceptional items, Singtel’s net profits plunged 44% to S$3.09 bn.
  • Net debt stood at S$9.9 billion and net gearing was manageable at the 24.9% level.
  • On the bright side, Singtel continues to churn out healthy free cashflow with S$3.65 bn for FY2019, up 1% compared to previous year.
  • Singtel has maintained their dividend pay-out at 17.5 cents despite the dip in earnings.

Following this earnings brief, we shall see if there’s any value left in Singtel by analyzing it from 4 angles using ShareInvestor’s Webpro.

1. Revenue & Profit Growth Over Past 5 Years

Just by looking at the above picture, we can see that the revenue is relatively stagnant over the past 5 years. Meanwhile, net profits are on a downward slide from S$3.78 billion in FY2015 to S$3.09 billion in FY 2019, disregarding the exceptional gains from NetLink Trust divestment in FY2018.

We can also see that the net margins have come down from an estimated average 22% to only 17.8% in FY2019. It is presumed to be the effect due to the price war among the 3 Telcos and shift towards cheaper data plans.

2. Dividend Analysis

Many investors take a liking to Singtel’s shares due to 2 main reasons:

  • It is Singapore’s largest telecom company affiliated with Temasek Holdings
  • Stable dividends year in year out

Thus, we will zoom into the dividend analysis of Singtel in this section.

Comparing the dividend per share (green bar) versus the earnings per share (blue bar), we can perceive that Singtel is quite disciplined in their capital/dividend policy where they only pay out dividends from their earnings.

Total dividends per share is kept at 17.5 cents for every year other than FY2018 (20.5 cents) as it made an exceptional gain from Netlink Trust’s sale.

Next up is the chart of Singtel’s dividend yield and PE ratio across the 5 years. Dividend yield was 4.48% in Mar 2015 and 5.54% in Mar 2019.

Given that Singtel’s dividend per share is constantly kept at 17.5 cents; its dividend yield has increased due to a lower share price, as seen below.

At one glance, the above dividend payout chart shows me the entire history of dividends for a given period. You can also see the record and payable dates when you hover over the “D” sign.

As for Singtel, the dividend pay-outs are usually paid twice during January and August each year.

3. Valuation Ratios

Excluding the one-off gains from Netlink Trust which led the P/E ratio to score a low of 11x, Singtel’s average P/E ratio has always been around the range of 16 - 17x.

4. Consensus Estimates

Consensus Estimates is a feature unique to ShareInvestor’s WebPro where it aggregates all the analyst ratings and target prices of a company.

As seen from the above, there are 24 analyst ratings covering Singtel and the consensus recommendation is “Overweight”.

This is based on the average of all recommendations of 1.35 derived from the following scale:

Buy Overweight Hold Underweight Sell
1 1.5 2 2.5 3

Happy investing!

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