The Financial Performance of Singapore’s Three Telcos

As investors, we need to understand our companies before we invest in them. One way to gain a better understanding of a company is to look at its industry peers as well.

In Singapore, one of the most well-known industries amongst consumers is likely to be telecommunications. After all, Singapore currently has a mobile penetration of nearly 150%.

There are currently three players in Singapore’s telecommunications scene and they are all listed. They are, in order of size (largest comes first), Singapore Telecommunications Limited (SGX: Z74), StarHub Ltd (SGX: CC3), and M1 Ltd (SGX: B2F).

For any investor who’s interested in any of the three telcos, I thought it’d be useful to place some of the trio’s important business metrics side-by-side. The numbers I’m interested in are their revenue and net profit growth, net margin, and returns on equity.

This is a table showing Singtel, StarHub, and M1’s revenue and net profit growth over their last five fiscal years:

Singtel, Starhub, M1 growth table - Lawrence
Source: S&P Global Market Intelligence

Here are the trio’s net margins:

Singtel, Starhub, M1 net margin table - Lawrence
Source: S&P Global Market Intelligence

And lastly, these are their returns on equity:

Singtel, Starhub, M1 ROE table - Lawrence
Source: S&P Global Market Intelligence

Let’s have a few quick words on why I wanted to look at those few metrics.

Growth is an important component of a stock’s value; the faster a company can grow, the more valuable it likely could be. As for the net margin, it measures a company’s efficiency at converting revenue into profit.

Then, there is the return on equity. It helps to gauge a company’s ability to generate a profit with the shareholders’ capital it has. The higher the return on equity, the higher the return on each dollar of shareholders’ capital.

But, the return on equity number may require further scrutiny, especially when different companies have different leverage profiles. With all things being equal, the use of higher leverage will help increase the return on equity. In the case of our three telcos, Starhub’s ROE of above 100% is partly due to the high level of leverage employed in its capital structure.

At this point, it should be noted that what we have seen above may be insightful, but it is important that investors have to perform further research to better understand the telecommunications industry and its players. This is crucial given the possible entrance of a fourth telco in Singapore in the near future.

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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.