Tuesday, June 2, 2015

Looking at the Singapore Telcos


M1 peaked on 2 Mar 2015 at $3.99
Singtel peaked on 16 Apr 2015 at $4.57
Starhub peaked on 17 Apr 2015 at $4.46

Currently, M1 is down exactly 20%, Singtel is down 11.9% and Starhub is down 10.3%.

Why are their prices going lower?

Perhaps it could also be because of the "rate hike" that will make current income plays less attractive. I think this is a very overblown point, but people do like to blame everything on the Federal Reserve, so oh well.

Or maybe it is the announcement of the 4th telecomm with SMRT and OMGTel? That does seem like the most like reason for the weakness across all the telcos to me, since the announcement was made on 15th Apr 2015. People who thinks that a 4th telco will have little to no impact are, in my opinion, underestimating the effects of an additional player.

1 pie with 3 people. Same pie with 4 people.

You don't need high skill levels of fundamental analysis here to know what is going to happen.


Based on the data from yieldstocks, we can see that they have a pretty decent yield of 4-5%. In fact, the yield of M1 is pushing 6% now!

Can M1 and Starhub maintain their high dividends? From an income investor's point of view, their situation looks quite precarious at this point. M1 has no leeway while Starhub only has a small margin of safety.

While Singtel does have the lowest yield, it also has the lowest payout ratio and its business as a whole is much more diversified than M1 or Starhub.

In May last year, I did a simple comparison of the telcos. Basically, my conclusion is that Singtel would be my prime choice as an investment. For me to invest in the other 2 telcos, I would need convincing prices to tempt me into them. I would need even more attractive pricing to be tempted into Starhub as opposed to M1, due to Starhub's gross amounts of leverage.

I'm just sitting on my hands now, resisting all the temptation to enter the market. I just love it when the market is red.

2 comments:

  1. Hi, there are some dropped words.
    "pushing 6% now!e precarious"
    "It looks quit" ...

    Please fill in the missing words? Thanks.

    ReplyDelete
    Replies
    1. Hi Anon,

      Thanks for pointing out the error!

      Delete

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