4 Key Trends That Investors Should Know About Singapore Telecommunications Limited

Singapore Telecommunications Limited (SGX: Z74) or Singtel, is one of the three main telecommunication firms in Singapore. The other two are M1 Ltd (SGX: B2F) and StarHub Ltd (SGX: CC3).

In the last five years, SingTel saw its revenue decline by about 8% while net profit went up by 10%. However, the numbers are more than meets the eye. Beneath the two numbers are some significant trends that investors should note.

In this article, we will look at the four key trends from its five years of historical performance that might be useful for investors to note.

Source: SingTel 2017 Annual Report

Declining revenue

The main reason for the decrease in revenue is the weakening of Optus’ revenue performance in the last five years. This was driven mainly by the depreciation of Australian Dollar to Singapore Dollar, and weaker revenue performance.

Increase in profitability

Despite weakening revenue, the overall profitability increased in the last five years. A closer look at the above numbers will show that the growth in profitability was driven by the increase in SingTel’s share of associates’ pre-tax profits, which was up by almost 40% during the period.

Declining cash flow

The next important trend to note here is that the group free cash flow had been reducing over the period, down 19% from S$3.76 billion in 2013 to S$3.05 billion in 2017.

Increasing dividends from associates

The dividends from associates had increased over the years, from S$900 million in 2013 to S$1.5 billion in 2017.

This has become an important source of free cash flow for the company as the main subsidiaries’ free cash flows have declined over the years. The dividends accounted for about 50% of SingTel’s 2017 free cash flow.

Key takeaway

From the above, we can see that SingTel, as a group, is increasingly dependent on the performance of its associates for future growth while its main subsidiaries are facing headwinds.

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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.