Key Telcos Averaged 5% Total Return in Sept18 QTD

Singtel, NetLink NBN Trust, StarHub & M1 have all generated similar gains in the September quarter-to-date, averaging +5.5% total returns, which has trimmed their average year-to-date decline in total return to -12.5%.
Singtel, StarHub & M1 have averaged annualised total returns of 7.4% from respective IPO dates to present. The three companies are currently valued at similar discounts to their five year average P/E ratios. Business Trust - NetLink NBN Trust - listed in July 2017.
With their recent financial results, the three companies and Business Trust all made reference to the fifth generation (5G) of cellular mobile communications, which is still in testing phases across the World and expected to be in global use by 2020.

Globally, stocks of the Telecommunication Services Sector have not performed as strong as other Sectors in the year-to-date. However both in Singapore and abroad, the largest of the Telecommunication stock have recovered some of their year-to-date losses in the current September quarter.

The FTSE All World Telecommunication Index is in the red in the 2018 year through to 20 Sept, and has underperformed the FTSE World Index by approximately 10% in SGD terms. However since the end of June, the FTSE All World Telecommunication Index has marginally outperformed the FTSE World Index.

Similarly in Singapore, the key 4 Telecommunication plays, which have all posted declines for the year thus far, have all gained in the Sept quarter-to-date.

Together the four technology plays, with the largest market capitalisation, have averaged a 5.5% total return in the quarter thus far. Total returns were not overly varied, ranging from 4.9% for StarHub to 6.1% for NetLink NBN Trust. The average 5.5% quarter-to-date gain for the four stocks has trimmed the average year-to-date decline to -12.5%.

Long-Term Average Annualised Total Returns

Average Annualised Total Returns Since IPO / QTD & YTD Total Returns

Source: SGX, Bloomberg (Data as of 20 September 2018)

November 1 will mark 25 years since Singtel listed on SGX. Since 1993, M1 listed in December 2002, StarHub listed in October 2004, and NetLink NBN Trust listed just last year in July 2017. For the 3 companies with a long term trading history the average annualised total returns since their respective IPOs was 7.4%. Since listing in July 2017, NetLink NBN Trust generated an annualised total return of 0.7%.

The 3 companies - Singtel, StarHub & M1 - are currently valued at similar 10% to 20% discounts to their five year average price-to-earnings (P/E) ratios. The average indicative dividend yields, based on distributions reported in SGX StockFacts is 6.9%.

For more details on the valuations below click on the table below.

Source: SGX StockFacts, Bloomberg (Data as of 20 September 2018)

With their recent financial results, the three companies and Business Trust all made reference to the fifth generation of cellular mobile communications - 5G:

Singtel has established a 5G Centre of Excellence in Singapore, and aims to prepare for the communications ecosystem for 5G services as standards are progressively introduced. Singtel will launch Singapore’s first 5G pilot network later this year while Optus and Globe will introduce fixed wireless solutions for homes in early and mid-2019 respectively.

StarHub has clocked Singapore’s fastest 3G and 4G speeds, according to OpenSignal. Notwithstanding this success, Management noted know exploring innovation in 5G services is also crucial. Following its 5G trials over the past two years, work on its pilot 5G network is underway to explore new enterprise solutions. Starhub added that simultaneously it also needs to deliver smart cost optimisation and digitalisation across the Company to improve its ability to serve customers better and faster and increase our margins and cash flow.

M1 noted it is committed to stay at the forefront of technology advancements and has embarked on early multi-vendor 5G trials, including Singapore’s first end-to-end 5G live trial in June 2018. Management noted this could provide insightful learning crucial to the successful development of relevant 5G services. M1 added its foundation of dense cell grid and advanced narrowband Internet-of-Things network, positions it to harness exciting new capabilities and support highly reliable and responsive applications on its network.

NetLink NBN Trust’s nationwide network is the foundation of Singapore’s Next Generation Nationwide Broadband Network (“Next Gen NBN”), over which ultra-high-speed internet access is delivered throughout mainland Singapore and its connected islands. The Trust Group highlighted that it is monitoring the development of the 5G network in Singapore and will explore opportunities associated with the new technology.

5G is still in testing phases and expected to be in use around the world by 2020.

Did you Know?

The telephone was first introduced in Singapore just three years after Alexander Graham Bell patented its invention. This was in the form of a trial that was made on a telegraph line between Raffles Square and Tanjong Pagar. For more information click here.

This document is not intended for distribution to, or for use by or to be acted on by any person or entity located in any jurisdiction where such distribution, use or action would be contrary to applicable laws or regulations or would subject Singapore Exchange Limited (“SGX”) to any registration or licensing requirement. This document is not an offer or solicitation to buy or sell, nor financial advice or recommendation for any investment product. This document is for general circulation only. It does not address the specific investment objectives, financial situation or particular needs of any person. Advice should be sought from a financial adviser regarding the suitability of any investment product before investing or adopting any investment strategies. Use of and/or reliance on this document is entirely at the reader’s own risk. Further information on this investment product may be obtained from www.sgx.com. Investment products are subject to significant investment risks, including the possible loss of the principal amount invested. Past performance of investment products is not indicative of their future performance. Examples provided are for illustrative purposes only. While each of SGX and its affiliates (collectively, the “SGX Group Companies”) have taken reasonable care to ensure the accuracy and completeness of the information provided, each of the SGX Group Companies disclaims any and all guarantees, representations and warranties, expressed or implied, in relation to this document and shall not be responsible or liable (whether under contract, tort (including negligence) or otherwise) for any loss or damage of any kind (whether direct, indirect or consequential losses or other economic loss of any kind, including without limitation loss of profit, loss of reputation and loss of opportunity) suffered or incurred by any person due to any omission, error, inaccuracy, incompleteness, or otherwise, any reliance on such information, or arising from and/or in connection with this document. The information in this document may have been obtained via third party sources and which have not been independently verified by any SGX Group Company. No SGX Group Company endorses or shall be liable for the content of information provided by third parties. The SGX Group Companies may deal in investment products in the usual course of their business, and may be on the opposite side of any trades. SGX is an exempt financial adviser under the Financial Advisers Act (Cap. 110) of Singapore. The information in this document is subject to change without notice. This document shall not be reproduced, republished, uploaded, linked, posted, transmitted, adapted, copied, translated, modified, edited or otherwise displayed or distributed in any manner without SGX’s prior written consent.

SGX Market Updates