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3 Things Singapore’s Telcos Have In Common That Investors Should Know

In Singapore’s telecommunications industry, there are only three players, namely Singapore Telecommunications Limited (SGX: Z74), StarHub Ltd (SGX: CC3), and M1 Ltd (SGX: B2F).

The three telcos each have a slightly different focus in their business model. For instance, M1 and StarHub derive most of their earnings in Singapore whereas Singtel sources its profits from many other countries beyond Singapore such as Australia, India, Thailand and more.

But, the trio do have some things in common. Here are three that investors may want to note:

1. Growing revenue and profits over past decade

Despite competing amongst themselves in Singapore, all three telcos have still managed to grow their revenues and profits over the past decade. The trio were also solidly profitable even during the financial crisis period from 2007 to 2009.

Though a fourth telco is likely to appear in Singapore’s market in the near future, it is difficult to foresee a situation in which the incumbents are so badly affected to the extent that they start making loses.

2. A track record of growing dividends

The three telcos have managed to consistently pay a dividend over their past 10 fiscal years. Moreover, they’ve also grown their dividends in that period.

In the case of Singtel, its ordinary dividend had climbed by over 70% from S$0.10 per share in its fiscal year ended 31 March 2006 (fiscal 2006) to S$0.175 in fiscal 2016. For StarHub, its payout has more than doubled from S$0.09 per share in 2005 to S$0.20 per share in 2016. Lastly, there’s M1, whose ordinary dividend has stepped up by 16.7% from S$0.131 per share to S$0.153 in the same timeframe as StarHub.

3. Valuation

The chart below plots the price to diluted earnings ratio for Singtel, StarHub, and M1 over the past five years.

PE ratio for Singtel, StarHub, and M1
Source: S&P Global Market Intelligence

As you can see, the trio currently have valuations that are nowhere near the highs seen in the period stretching from 17 June 2011 to today.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.