Singtel’s stock surged 6.49% today as Singtel is said to tap Bank of America for pursuit of Australia’s Amaysim.
According to Bloomberg, Singtel is moving ahead with examining a possible bid for wireless operator Amaysim Australia, people with knowledge of the matter said. This deal would mean that Amaysim would give Singtel access to its 1.1 million mobile subscribers. Meanwhile, Amaysim shares jumped 19% – its biggest intraday gain in 2 years.
On the other hand, another competitor, TPG telecom is looking into a potential merger with Vodafone Hutchison Australia. With the impending entry of TPG, it is planning to launch a similar unlimited data plan in Singapore.
However, Jonathan Koh, a UOB Kay Hian analyst has weighed the possibilities of what could happen if TPG were to launch a similar unlimited data plan in Singapore. TPG will provide data-only packages and will not be offering traditional voice initially, he said.
Whereas, Singtel’s Optus, has its Unleashed Mobile 12-month SIM- only plan that is only available to its customers selected by the telco. Each customer is allowed to have a maximum of 5 Unleashed data lines. He also mentioned that price competition would intensify if TPG Telecom launches a similar unlimited data plan in Singapore.
TPG positioned as a no frill budget player offering in Australia, but its mobile plans are no doubt highly affordable. Koh also mentioned that they maintain their defensive stance on Singapore’s telco sector despite the imminent entry of TPG as the 4th mobile operator. Singtel is less susceptible to TPG’s entry due to its geographical diversification. However, M1 and Starhub are more vulnerable from TPG’s entry.
Here’s a quick glance on the current stock prices of the top 3 Telcos in Singapore:
SingTel (SGX: Z74)‘s YTD performance is -8.63%:
M1 (SGX: B2F) YTD performance is -12.91%:
StarHub (SGX: CC3) YTD performance is a whopping -42.97%:
Now many investors might be asking themselves whether telco stocks are a good buy right now.
Let’s look at the Ratios Comparison below:
*All ratios obtained are based on Trailing Twelve Months (LTM) from SGX
|Current Ratio||0.888 (3)||1.435 (1)||0.994 (2)|
|Quick Ratio||0.829 (3)||1.174 (1)||0.937 (2)|
|Interest Coverage Ratio||14.214 (3)||26.23 (1)||18.857 (2)|
|Debt/Equity||30.625 (3)||88.149 (2)||164.178 (1)|
Current Debt Scores:
Singtel: 3+3+3+3/4 = 3
M1: 1+1+1+2/4 = 1.25
Starhub: 2+2+2+1/4 = 1.75
These final numbers reflect how each company’s current debt situation stacks up against one another. We can see Singtel is lagging far behind compare to the other 2 competitors in regards to their debt.
|Gross Margins||30.125 (3)||44.83 (1)||39.669 (2)|
|Net Income Margins||30.8 (1)||12.356 (2)||9.07 (3)|
|Return on Assets||3.494 (3)||8.614 (1)||7.606 (2)|
Singtel: 3+1+3/3 = 2.33
M1: 1+2+1/3 = 1.33
Starhub: 2+3+2/3 = 2.33
In terms of profitability, based on numbers alone, M1 ranked as first and Singtel and Starhub come second.
Growth over the Prior Year in %
|Total Revenue||3.25 (1)||1.114 (2)||0.996 (3)|
|EBITDA||0.9 (1)||0.123 (2)||-11.074 (3)|
|Net Income||41.991 (1)||-2.657 (2)||-26.335 (3)|
|Normalized Diluted EPS||40.683 (1)||2.218 (2)||-29.22 (3)|
|Common Equity||5.442 (3)||21.73 (2)||47.391 (1)|
Singtel: 1+1+1+1+3/5 = 1.4
M1: 2+2+2+2+2/5 = 2
Starhub: 3+3+3+3+1 = 2.6
However, when it comes growth over the prior year, Singtel beats M1 and Starhub.
Some people might say that by making a decision solely based on financial ratios is incomplete and might be unable to fully capture a business’s operations in just one number. But, when many of them are used together, a bigger picture can be seen, especially when one use it to compare it with its other competitors and tracking performance for an extended period of time.
Now, investors might ask – Will there be a further uplift in Singtel in the future?
Check out what other investors are saying now about Singtel now:
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