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The Most Important Blue-Chips in The Singapore Stock Market: Telcos

Some companies in Singapore hold more sway than others. But a handful of companies may be influential enough to move Singapore’s Straits Times Index (SGX: ^STI).

The STI is often seen as a barometer for Singapore’s stock market. The index is made up from 30 of the largest listed companies in Singapore. These companies come from a variety of industries and sectors. The telecommunications industry represents a sizable part of the index with four companies with exposure to the industry. Let’s have a look at these companies (data as of the end of August 2018).

1. Singapore Telecommunications Limited (SGX: Z74), at a market capitalisation of S$51 billion, is the largest telecom company on the index weighting of 8.4%. Singtel is the largest mobile service provider in Singapore with 4.1 million subscribers. Beyond the Lion City, Singtel has a presence in 25 countries. Over last three years, Singtel shares has netted a negative 0.4% in total returns for investors. Currently, the telco sports a dividend yield of 5.6%, and trades at a PE ratio of 9.6.

2. The next telecom company which is part of the index is Starhub Ltd (SHX: CC3). Starhub is one of the three major telecommunication companies in Singapore, and its weightage in the index stands at a meagre 0.4%. The past three years have been tough for Starhub with its stock price registering a negative 44.4% return. This weak performance is mostly due to the heightened competitive environment. Last Thursday, news broke that Starhub will be removed from the index to be replaced by Dairy Farm International Holdings Ltd (SGX: D05). Starhub has a market capitalisation S$2.8 billion, and pays out a dividend of 9.8% at current prices.

3. The third and fourth companies involved in the telecommunication business might come as a surprise to some investors. The duo are Singapore Press Holdings Limited (SGX:T39) and Keppel Corporation Limited (SGX:BN4). Their involvement in the telco sectors comes from their stake in M1 Ltd (SGX: B2F). As at February 2018, SPH owned 13.5% of M1 while Keppel corporation through its subsidiary Keppel Telecom owed 19.3%. As an individual company, M1 has had a difficult three years with its stock price dropping some 45%. Like Starhub, M1 is facing increased pressure from a tougher competitive landscape here in Singapore. As for the two owners, SPH has returned a negative 17.2% over the past three years, and currently sports a market capitalisation of S$4.4 billion and a dividend yield of 5.5%. Meanwhile, Keppel Corporation has seen total returns of just 6% over the same period. Currently, Keppel has a market capitalisation of S$11.5 billion and a yield of 3.8%.

The overview of the three telecommunication companies shows us that the industry as a whole has been facing a difficult operating environment over the past three years. Between the two telecommunication companies that are direct constituents of the index, Singtel may hold some sway on the future direction of the STI.

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The Motley Fool Singapore contributor Esjay contributed to this article. Esjay owns shares in Singtel.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Dairy Farm International. Motley Fool Singapore writer Chin Hui Leong owns shares in Dairy Farm International.