Singapore Telecommunications Limited (SGX: Z74) is the largest operational telco in Singapore. Its two other competitors are, in order of size, StarHub Ltd (SGX: CC3) and M1 Ltd (SGX: B2F).
Over the last 12 months, Singtel?s stock price has declined by 5.5% to its current level of S$3.61, and is currently just a hair?s breadth higher than a 52-week low of S$3.57. Singapore?s stock market barometer, the Straits Times Index (SGX: ^STI), is up by 18% over the same timeframe. This may raise an important question among investors: Is Singtel?s stock actually cheap now?
Unfortunately, there is no easy answer. But,…
Over the last 12 months, Singtel’s stock price has declined by 5.5% to its current level of S$3.61, and is currently just a hair’s breadth higher than a 52-week low of S$3.57. Singapore’s stock market barometer, the Straits Times Index (SGX: ^STI), is up by 18% over the same timeframe. This may raise an important question among investors: Is Singtel’s stock actually cheap now?
Unfortunately, there is no easy answer. But, we can still get some insight by comparing Singtel’s current valuations with those of its peers. The three valuation metrics I will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield.
Singtel currently has a PB ratio of 2.0, which is lower than both Starhub’s PB ratio of 12.9, and M1’s ratio of 4.4. When it comes to the PE ratio, there is a mixed dynamic; Singtel has a PE ratio of 15.8 right now (after adjusting for a one-off gain from the IPO of NetLink NBN Trust (SGX: CJLU) in July 2017), whereas StarHub and M1 have PE ratios of 17.8 and 13.0, respectively.
On the other hand, Singtel’s dividend yield is 4.9%, which is lower than both the yields of StarHub (5.4%) and M1 (5.8%). The lower a stock’s yield is, the higher is its valuation.
Putting it all together, it appears that Singtel is priced at a discount to StarHub, given the former’s lower PB and PE ratios. When Singtel’s PB and PE ratios are compared with M1’s, the picture is a little unclear. Nonetheless, despite Singtel’s relatively lower dividend yield, income investors may still find the telco attractive when it is placed alongside the SPDR STI ETF’s (SGX: ES3) yield of 2.81%. The SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of the Straits Times Index.
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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.