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The Battle of the Big Three Telcos: Here’s the Best Performer

Singaporeans are likely to be familiar with the three mobile services providers available in the Garden City.

The trio would be Singapore Telecommunications Limited (SGX: Z74)StarHub Ltd (SGX: CC3), and M1 Ltd (SGX: B2F). It may be easy to compare the mobile services offered by the three, but comparing each company’s performance may take a bit more work.

Thankfully, we have some help.

recent report summarised the performance, valuation, and outlook of the trio. Here’re some highlights from the report (figures are as of 23 May 2016, unless otherwise stated):

  1. StarHub topped the returns list with its total return of 65% over the last five years. Singtel is not far behind with a total return of 61% in the same period. M1, though, had a significantly poorer total return of 27%.
  2. The trio may be in a similar line of business, but they differ significantly in terms of their market capitalisations. Singtel weighed in with a hefty market cap of $61.7 billion. It has operations across multiple Asian countries. In contrast, StarHub and M1 have market caps of just $6 billion and $2.2 billion, respectively. Both companies also operate mainly within Singapore.
  3. The SPDR STI ETF (SGX: ES3), an exchange-traded fund that tracks the fundamentals of the Straits Times Index (SGX: ^STI), has a price to earnings (PE) ratio of 11.6 as of 30 May 2016. This could be a useful measure to see where the three telcos stand in terms of their valuation. M1, for instance, had a PE ratio of just 12.6. Singtel and StarHub, on the other hand, sport PE ratios which are above 15.
  4. Telcos may be best loved by investors for their historically consistent dividends. M1 offered a compelling dividend yield of 6.5%. In contrast, the SPDR STI ETF had a dividend yield of ‘only’ 3.5% as of 30 May 2016. But, investors may want to note that M1 reduced its dividend payout from 18.9 cents in 2014 to 15.3 cents in 2015.
  5. Meanwhile, StarHub offered a dividend yield of 5.8%. Its dividend in 2015 was $0.20 per share, unchanged from 2014. StarHub expects its payout in 2016 to remain at the same level. Singtel’s dividend of $0.175 per share in fiscal 2016 (fiscal year ended 31 March 2016) was the same as in fiscal 2015. It offered a dividend yield of 4.6%.

While the trio of Singtel, StarHub, and M1 are all classified as telecommunications companies, they differ substantially as businesses and as stocks. Each telco offers a different risk profile and valuation. As investors, we might want to consider these points before investing in any telco.

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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.