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Singapore Telecommunications Limited’s Valuation: Today vs. History

Singapore Telecommunications Limited (SGX: Z74) is the largest listed Singapore company and the Garden City’s largest telecommunications services provider. It is also likely to be one of the most well-known companies in Singapore since its business touches the daily lives of millions of Singaporeans.

The telecommunications industry in Singapore is undergoing major changes right now as a result of the impending entry of a fourth player into the scene. In Singapore, the telecommunications industry has had only three companies for many years.

Given such a major change taking place, I thought it’d be interesting to look at Singtel’s current valuations and compare them with history. The two valuation ratios I’m focusing on are the price-to-book (PB) ratio and price-to-earnings (PE) ratio.

Right now, Singtel has a share price of S$3.93 and this gives the company a PB ratio of 2.5. Here’s a chart showing the telco’s PB ratio over the past five years:

singtels-pb-ratio-over-past-five-years
Source: S&P Global Market Intelligence

As we can see from the chart above, the PB ratio for Singtel has been ascending for the timeframe under study and is currently at the higher end of the five-year range.

The following chart shows Singtel’s PE ratio over the past five years:

singtels-pe-ratio-over-past-five-years
Source: S&P Global Market Intelligence

In a similar manner to the PB ratio, Singtel’s PE ratio has also been rising. The company’s PE ratio of 16.3 right now is near a five-year high as well.

What the two charts show us is that Singtel is currently trading at PB and PE ratios that are at the higher end of their five-year historical ranges. This is interesting since investors have appeared to become more optimistic about Singtel (as alluded to from the rising valuations) over the past few years in spite of the potential increase in competition when a fourth-player enters the market.

In any case, it is important to understand that valuation metrics are only one of the many aspects about a company that investors should consider before making any investment decision.

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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.