Here Is a Better Investing Comparison with Singapore Telecommunications Limited

When investors are looking at the telecommunications space in Singapore, there’s a tendency to compare the three major listed telcos here.

They are, in order of size, Singapore Telecommunications Limited (SGX: Z74), StarHub Ltd (SGX: CC3) and M1 Ltd (SGX: B2F).

But, it may not make much sense to compare Singapore Telecommunications, a mighty S$61 billion company with a strong international presence, with the other two much smaller, Singapore-focused telcos. To the point, StarHub and M1 have market caps of ‘only’ S$6.2 billion and S$2.6 billion currently.

A better comparison with Singtel can actually be found up north in neighbouring Malaysia. Axiata Group Bhd (KLSE:6888.KL) is the largest telco listed on Bursa Malaysia, the stock exchange of Malaysia.

Like Singtel, Axiata has business interests all over Asia. Besides Malaysia, Axiata also has a presence in Pakistan, India, Sri Lanka, Bangladesh, Cambodia, Indonesia and even Singapore. That is right, Axiata is involved in Singapore’s telco scene too through its 28% stake in M1.

So, how do the two Asia-based telco giants – Singtel and Axiata – stack up against each other?

Size does matter

Despite having many investments globally, Axiata is still considerably smaller than Singtel – the former has a market cap of ‘only’ RM53 billion (S$18 billion).

In terms of their valuations, Singtel is currently trading at 16 times its trailing earnings while Axiata has a price-to-earnings ratio of 20. In this sense, Singtel might be the “cheaper” option. Moreover, Singtel also offers a more attractive dividend yield at 4.6%. Axiata only has a dividend yield of 3.6%.

Which has been a better investment?

From December 2010 to today, Axiata and Singtel have generated returns of 54% and 58%, respectively, with dividends reinvested. Bear in mind that the returns are also based on the companies’ local currencies (the Singapore dollar for Singtel, and the Malaysian ringgit for Axiata). Thus, with the weak performance of the ringgit over the same period, Singtel has definitely been the better performing stock of the two over the past five years.

But, does it mean that Singtel will continue to outperform Axiata in the years to come? That will be largely dependent on how Singtel’s business performs in relation to Axiata. Let’s see where we are in five years’ time.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim does not own any companies mentioned above.