OVERVIEW:
The counter is a leading communication group with significant presence in Singapore and Australia (Optus). It own stakes in regional mobile associates, namely Bharti Airtel (India, South Asia and Africa), Telkomsel (Indonesia), Advanced Info Service (Thailand) and Globe Telecom (the Philippines). The services range include fixed line, mobile, data, internet, TV, infocomm technology (ICT) and digital solutions.
ANALYSIS:
[1] Last August, Singtel further acquired shares from Intouch (major shareholder of Thailand mobile operator AIS) and Bharti Telecom (India mobile operator) for a consideration of $2.47b. The funding mainly came from shares placement ($4.16 per Singtel shares) to Temasek which translates to ~2.4% shares dilution. Management indicated the acquisition will secure better economic benefit from regional market, as Thailand and India has been high-market growth to them. Although the transaction will prompt net adjusted leverage, Moody maintained its credit assessment to the company.
[2] On Mid Nov, Thomson Reuters revealed that the company hired DBS, Morgan Stanley and UBS to handle an IPO of up to $2.5b for its broadband subsidiary NetLink Trust, which is expected to take place on 2nd or 3rd quarter of 2017. It could further enhance company cash-flow. A 'special dividend' could be announced due to one-off gain.
[3] On December, it's Australia subsidiary, Optus announced a new 5 years Managed Services contract (worth ~$20m) with Townscville City Council as well as 3 years contract extension (worth ~$40m) with specialist security provider, Suretek.
[4] On early December, TPG from Australia won the bidding to become 4th Telco in demestic market. The spectrum rights commences on April 2017, and TPG might launch its mobile on 2018. Among local telco incumbents, Singtel is widely recognized to be least impacted. Its debt gearing is lowest and earning stability is best among its peers. Mobile business occupy ~7% of the group and 37% of mobile service revenue came from enterprises (which are less likely to switch operator). Recent downward pressure among incumbents' share price presents opportunity to accumulate Singtel.
PRICE vs YIELD CHART:
The counter will enter EX (expiry of dividend entitlement) on coming Monday. Price could fall ~0.68 (dividend paid) from last trading price 3.73. It could touch down to immediate support $3.6 which translates dividend yield ~4.8%, without considering further earning growth as well as any special dividend. It is pretty attractive yield. Compared to recent share placement price, $4.16, it is actually in deep discount ~14%.
*** Note: Same counter has been mentioned in Sep[1] 2016 ***
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