The Motley Fool

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

Singapore Telecommunications Limited (SGX: Z74) or Singtel, is one of the three main telcos in Singapore.

In the last 12 months, Singtel’s share price was down by 14% and is currently trading close to its 52-week low price (as of the time of writing). This raises an important question: Is Singtel’s stock cheap?

Unfortunately, there is no easy answer to this. Still, we will try to answer that question by looking at its valuation. To do so, we will compare Singtel’s current valuation to the market in terms of three perspectives, namely price-to-book (PB), price-to-earnings (PE) and dividend yield. This should give us some hints of whether the company is trading at a bargain price.

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 1.8 times, which is higher than the SPDR STI ETF’s PB ratio of 1.2. This makes Singtel 49% more expensive than the market based on the PB ratio. Yet, Singtel’s PE ratio is 15% cheaper than that of the SPDR STI ETF’s (9.5 vs 11.2).

As for dividend yield, Singtel has a high dividend yield of 5.3% as compared to the market’s yield of 2.9%. This shows that Singtel is currently trading at a 46% discount to the market’s yield.

Putting all together, we can argue that Singtel is probably trading at a marginal bargain price, mainly due to its low PE ratio and high dividend yield, partially offset by its high PB ratio.

How We Made an 88% Return in Just 19 Months!

Members of David Kuo’s personal investing club Stock Advisor Gold were recently rewarded with the biggest winner Motley Fool Singapore has seen to date. In a special, 100% FREE report we’ve put together, we take you behind the scenes to show you exactly how we first uncovered this stock… every article and piece of research we released on it… and what ultimately led to our decision to SELL for an 88% gain. Click here to claim your copy now!

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.