The Motley Fool

Singapore Telecommunications Limited’s Lacklustre Track Record Of Growth

Singapore Telecommunications Limited (SGX: Z74) is the largest operational telco in Singapore’s market. It is also one of the largest listed companies in the local stock market with a market capitalisation of nearly S$53 billion. But being large does not mean that Singtel will automatically be a good investment: Whether Singtel can deliver good returns for investors will largely depend on its future business performance.

One of the things that I like to do when analysing a company’s prospects is to study its track record. The past is no guarantee of the future. But historical information is the most reliable thing that we can use as our basis to forecast what lies ahead.

So, the table below is a snapshot of Singtel’s important financial metrics from FY2014 (financial year ended 31 March 2014) to FY2018:

Source: Singtel FY2018 annual report

Here are a few points worth noting:

1. Singtel’s revenue grew by a total of just 4.0% for the period above, rising from S$16.85 billion to S$17.53 billion. The telco’s top line had been pressured by unfavourable currency movements, but even if the impacts of the currency swings are excluded, Singtel’s revenue would have grown by a total of just 10.5% over the same period.

2. Underlying net profit declined by 2% from S$3.61 billion in FY2014 to S$3.54 billion in FY2018 due to a weaker exchange rate and higher expenditures in Singapore; the negative impacts were offset partially by higher contributions from Singtel’s investments.

3. The telco’s dividend per share (excluding special dividends) improved by just 4.2% for the timeframe we’re studying.

In sum, Singtel had not managed to grow its business by much over the past five years, but it still delivered a stable performance. Nevertheless, investors who are looking for growth might need to look elsewhere since Singtel has shown little growth.

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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.