Singapore Telecommunications Limited is Trading Close To Its 52-Week Low Price: Is it Cheap?

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

In the last three months, SingTel’s share price has declined by 5% and it is currently trading close to its 52-week low price. This raises an important question: Is SingTel’s stock actually cheap?

Unfortunately, there is no easy answer to this since there are many ways to look at valuation. Still, we will try to answer the above question by comparing SingTel’s current valuation to the market in terms three perspectives, namely price to book (PB), price to earnings (PE), and dividend yield.

I will be using the SPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).

SingTel currently has a PB ratio of 2.1, which is higher than the SPDR STI ETF’s PB ratio of 1.3. This makes SingTel 70% pricier than the market based on the PB ratio. Similarly, SingTel’s PE ratio is 38% higher than that of the SPDR STI ETF’s (15.8 vs 11.4).

On the other hand, SingTel has a dividend yield of 4.7%, which is more than the market’s yield of 3.0%. The higher the yield, the lower the valuation. On that basis, SingTel is trading at a 36% discount to the market’s yield.

In summary, we can argue that SingTel is currently priced at a premium to the market given its significantly higher PB and PE ratios. Nevertheless, income investors may still be interested in the company since it has a dividend yield that is above the market average.

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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.