Singtel - 4th Jul'18

Singtel closed at 3.02 yesterday, what a direct flight from ~3.40 to current price. So what drives to this trend? The logic seems works for me, main trigger from May 17: Singtel announced the Q4 and 2018 Final report:

•  Revenue increased (+4.9%) but the underlying net profit dropped (-7.8%) if exclude the gain from the disposition of NetLink Trust.
• Revenue increase for all the sector except for the National Phone and International Phone, this 2 consist of a small portion of the revenue @ ~8%, something to note but not big.
• Operation profit dropped mainly from the result of a decline in Airtel’s India earnings and charges from increased network investments and spectrum.
• 2018 total Div payout is ~81% (include all the special div). This is good for 2018 but no longer for future where by the Div payout will be fixed at 17.5ct for the next 2 FY. Resume the 60-75% Div payout only by FY21.
• Expect stable “single digit” profit for next 2 years before Singtel can see anything increase in the profit.

Recent share buyback (actually very tiny if compare to the overall all Cap size of SingTel.):

• May 17: SGD ~1 mil @ SGD3.42/3.43
• May28: SGD ~ 0.44mil @ SGD 3.34

Risk:

• Increase of compaction in Singapore telco market with new players coming in end of this year.
• India Telco join venture is facing hard fight with new competitor.
• Invrstment cost.

What Singtel is doing so far (According to the latest annual report):

• Singtel embarked on a company-wide digital transformation more than five years ago to rebuild our business around data and digital. As digital eroded industry barriers and disrupted old business models, going digital has meant developing strategies that go beyond the context of our telco industry. Instead, we have leveraged our telco assets and customer relationships to develop new businesses such as cyber security, digital marketing and smart city solutions. We have also begun building a digital ecosystem with our associates to aggregate millions of customers across the region. As digital
• Had revolutionized consumer behavior and company processes, we have also digitalised our core consumer and enterprise businesses.
• Our new growth initiatives have grown from strength to strength – our digital and ICT businesses now contribute nearly 25% of Group revenue.

The reason i buy in:

• Share price @ 52 weeks low (S$3.4 at that point of time)
• Good div pay out and stable track record
• Singapore blue chip
• Regional dai kor for Telco
• Sound solid management (based on the road map and transform seen on Singtel)

Any changes against my reason of purchase?

• Share price @ 52 weeks low -> No, now even lower... haha
• Good div pay out and stable track record -> announced fix DY for 17.5ct for next 2 FY and resume in FY21, still acceptable to me.
• Singapore blue chip -> No change
• Regional dai kor for Telco -> No change
• Sound solid management (based on the road map and transform seen on Singtel) -> No key person changes

Conclusion:

• Hold at this moment in view of Div payout in Aug.
• Expect small re-bounce after reason heavy sell.

- Temporary have no plan to top up, lets see the share price movement in this few days as well as after the Annual GM on 7/24.