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Singtel - More trouble ahead?

Singtel continues to show weakness with yet another set of disappointing results.




For the three-month period ending Dec 2018, EPS declined from 5.88 cents to 5.04 cents. In other words, the EPS for the full year may decline to 20.12 cents.

If so, the expected dividend payout after the 2020 may decline to 12 cents to 15 cents a share. At current share price ($3), this translates to a yield of 4% to 5%. To be fair, this is by no means terrible for a blue chip stock, but it is a far cry from its current 17.5 cents a share dividend.

A critical factor for the continued weakness was attributed to fierce competition in India (Bharti Airtel), which posted losses. It further did not help that Singtel's ID and TH associates also posted lower profits due to "handset subsidies and advertising".

I believe Singtel continues to be a long term value play, primarily because Singtel's size and experience would ultimately allow it to gain an edge over the competition in its Asian businesses.  Singtel retains a healthy balance sheet, with FCF of 2.53 Bn. This will continue to afford Singtel ammunition to wear down its competition and take a larger slice of pie when the markets revert to sustainable profit structures.




If you have not yet invested into Singtel, or are waiting for an opportunity to accumulate/average down, you might want to wait to see how much further EPS would decline before deciding on an appropriately safe entry price. 

For income investors with long investment horizons, this transient weakness should not be overly disconcerting. Indeed, these may be opportunities to take meaningful positions in a sleeping Asian behemoth. 

Onward to FI!

Comments

  1. MMF SolutionsFebruary 15, 2019 at 8:56 PM

    Well, didn't expect this from singtel. I was thinking to consider it for my next investment. Anyways, thanks for the details.

    ReplyDelete
  2. Edwin DaiFebruary 18, 2019 at 10:46 AM

    No problem. I am holding onto quite a fair bit of Singtel. Hopefully, the turnaround happens sooner rather than later. Thanks for reading!

    ReplyDelete
  3. INTJFebruary 21, 2019 at 1:18 PM

    Hi edwin

    For Singtel growth areas like cybersecurity and IOT
    Will you have any insight to the nature of their business and capex requirements?

    ReplyDelete
    Replies
    1. Edwin DaiFebruary 22, 2019 at 12:02 PM

      Hello INTJ

      Thanks for dropping by.

      Unfortunately I do not have further information beyond those disclosed by Singtel in their reports. Cybersecurity falls under their Group Enterprise arm, and as far as I can tell, the YoY growth in that sector is pretty decent in Singapore at +13.4%, but flat in AU (-1.3%).

      https://www.singtel.com/content/dam/singtel/investorRelations/financialResults/2019/Q3FY19-MDA.pdf

      Delete

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