Speak of telecommunication stocks in Singapore, and it?s likely that the big trio of Singapore Telecommunications Limited (SGX: Z74), StarHub Ltd (SGX: CC3), and M1 Ltd (SGX: B2F) will feature.
A recent report from bourse operator Singapore Exchange Limited (SGX: S68) may offer deeper insight into the trio. Here?re seven highlights I?ve gathered from the report (data as of 10 February 2016, unless otherwise stated):
Based on the Global Industry Classification System, there are ten companies in Singapore?s stock market which qualify to be included as part of the telecommunications sector. The combined market capitalisation of the dectet is S$67.1 billion. The big trio of SingTel, StarHub and M1, though,…
A recent report from bourse operator Singapore Exchange Limited (SGX: S68) may offer deeper insight into the trio. Here’re seven highlights I’ve gathered from the report (data as of 10 February 2016, unless otherwise stated):
- Based on the Global Industry Classification System, there are ten companies in Singapore’s stock market which qualify to be included as part of the telecommunications sector. The combined market capitalisation of the dectet is S$67.1 billion. The big trio of SingTel, StarHub and M1, though, take up the lion’s share of that pie with a combined market capitalisation of S$66.9 billion. SingTel tips the scales at a massive S$58.4 billion and it is the second largest listed company in Singapore.
- The big trio are huge in South East Asia’s telco sector as well. According to the Singapore Exchange report, the three telcos accounted for 28.4% of the total market capitalisation for the South East Asia telecommunications sector.
- SingTel, StarHub, and M1 also comes out tops in terms of their dividend yield, boasting an average yield of 5.5%. This is higher than the average for ASEAN telco stocks. Of the trio, M1 offers the fattest yield at 6.1%, followed by StarHub with 5.6% and Singtel with 4.8%. For perspective, the the SPDR STI ETF (SGX: ES3), an exchange-traded fund that mimics the fundamentals of the Straits Times Index (SGX: ^STI), offered a distribution yield of 3.9%, as of 12 February 2016.
- But, there may be reason to be cautious about the dividends of Singapore’s big three telcos. The Singapore Exchange report also noted that SingTel is the only one which has a free cash flow yield that matches its dividend yield. Both StarHub and M1 fall short by the same measure.
- StarHub stands out as the top performer of the trio, recording an 81.4% total return over the past five years. M1’s the relative laggard with a 36% return over the same timeframe while SingTel sits in the middle with a 55.7% return.
- M1 has the lowest trailing price-to-earnings (PE) ratio at 13. Meanwhile, StarHub and SingTel have PE ratios of 16.1 and 15.0, respectively. For perspective, the SPDR STI ETF has a trailing PE ratio of 10.5, as of 12 February 2016.
- The trio of SingTel, StarHub, and M1 have all logged negative returns since the start of 2016. There could be a good reason why that’s so. The three telco stocks share a common threat to their businesses in the form of the potential arrival of a fourth telco. With the penetration rate in Singapore’s mobile phone market already at nearly 150%, there are fears that an introduction of a new player might lead to a price war. MyRepublic is one of the candidates angling for the fourth telco license. Malcolm Rodrigues, the Chief Executive Officer (CEO) for MyRepublic, mused that there is a “desperate need for innovation in Singapore.” But, SingTel’s CEO, Chua Sock Koong, disagrees with Rodrigues’ assessment, stating that there is healthy competition in the market.
A comparison of different firms within the same industry on several aspects helps us understand the companies better and gives us clues on which company might be worth following. This may give us a head-start on our investing homework that follows.
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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 contributor Chin Hui Leong doesn’t own shares in any companies mentioned.