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Is Singapore Telecommunications Limited a Buying Opportunity After Falling 16%?

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

At the share price of S$2.99 (at the time of writing), Singtel’s share price has declined by about 16% from its highest point in the last 12 months of S$3.58. This raises a question: Is Singtel’s stock cheap now? If shares are cheap, it might be a good opportunity for investors.

There is no easy answer, but we can get some insight by comparing Singtel’s current valuation with the market’s valuation. We’ll use three common valuation metrics: the price-to-book (P/B) ratio, price-to-earnings (P/E) ratio, 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 P/B ratio of 1.7, which is higher than the SPDR STI ETF’s P/B ratio of 1.1. Similarly, its P/E ratio is higher than that of the SPDR STI ETF’s (15.9 vs. 11.3). On the other hand, the conglomerate’s dividend yield of 5.9% is higher than the market’s yield of 3.6%. The higher a stock’s yield, the lower its valuation.

Singtel looks to be priced at a premium to the market average thanks to its high P/B ratio and high P/E ratio. However, its high dividend yield might be attractive for income investors.

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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.