In May 2019, Communication Services was the top net buy sector on SGX, attracting institutional inflows of S$135.8 million. May’s net inflow also reversed total outflows of S$205.5 million from the sector over the first 4M of the year.
The three largest telecommunications service providers on SGX – Singtel, NetLink NBN Trust and StarHub – have a combined market capitalisation of more than S$60 billion. Singtel was the top net buy stock in the month of May, garnering the highest institutional inflow of S$127.0 million.
In the YTD, the three telco players have averaged a total return of 9.0%, bringing their 1Y total return to 14.1%. The trio also average a 12M dividend indicated yield of 6.7%, which compares with the benchmark STI’s yield of about 3.8%.
In May 2019, Communication Services was the top net buy sector on SGX, attracting institutional inflows of S$135.8 million. Singapore Telecommunications was also the top net buy stock in the month of May, garnering the highest inflow of S$127.0 million. May’s net inflow also reversed total outflows of S$205.5 million from the sector over the first four months of the year.
Source: SGX data
The three largest telecommunications service providers on SGX – Singtel, NetLink NBN Trust and StarHub – have a combined market capitalisation of more than S$60 billion. Singapore’s smallest telco – M1 – delisted in March 2019, after local conglomerate Keppel Corp and media company Singapore Press Holdings jointly bought out Malaysian telecoms provider Axiata Group’s 28.7% stake in M1.
In the 2019 year-to-date, the three telco players have averaged a total return of 9.0%, bringing their one-year total return to 14.1%. The trio also average a 12-month dividend indicated yield of 6.7%, which compares with the benchmark Straits Times Index’s (STI) yield of about 3.8%.
The table below details the three largest telco plays on SGX, sorted by market cap.
| Name | SGX Code |
Market Cap (S$B) |
Total Return YTD % |
Total Return 1 Yr % |
Total Return 3 Yr % |
|---|---|---|---|---|---|
| SINGTEL | Z74 | 56.3 | 17.4 | 15.1 | 4.5 |
| NETLINK NBN TRUST | CJLU | 3.4 | 18.5 | 23.8 | NA~ |
| STARHUB | CC3 | 2.6 | -8.9 | 3.5 | -47.8 |
| Average | 9.0 | 14.1 |
| Name | SGX Code |
Market Cap (S$B) |
12M Div Ind Yld (%) |
P/E (x) |
|---|---|---|---|---|
| SINGTEL | Z74 | 56.3 | 5.1 | 18.2 |
| NETLINK NBN TRUST | CJLU | 3.4 | 5.6 | 1.1* |
| STARHUB | CC3 | 2.6 | 9.3 | 14.4 |
| Average | 6.7 |
Source: Bloomberg & StockFacts (data as of 21 June 2019)
* PB instead of PE ratio used for NetLink as more relevant for business trusts
~ Listing date of 19 July 2017
Singtel Battles Higher Competition, Costs on Firm Fundamentals
For the full year ended 31 March 2019, Singtel reported a net profit of S$3.1 billion, down 44% due to lower contributions from its mobile associates, and following an exceptional gain last year from its 75% divestment of NetLink NBN Trust.
Pretax earnings from the regional associates declined 38% YoY to S$1.4 billion. This was driven by Bharti Airtel’s results, which were impacted by competitive pressures, as well as the associates’ higher depreciation, spectrum amortisation and network costs from continued expansion of their respective 4G networks.
The fundamentals of the Group’s core business remained strong as it gained market share in mobile across both Singapore and Australia, led by product innovations, content and services, Singtel CEO Chua Sock Koong said in the Group’s 15 May 2019 results statement.
“Looking ahead, we will accelerate our digitalisation efforts to drive better customer experience and improve productivity and cost structure by transforming our processes,” she added.
NetLink Outperforms IPO Projections as Connections Expand
For the full year ended 31 March 2019, NetLink NBN Trust reported that its earnings before interest, tax, depreciation and amortisation (EBITDA) and profit after tax outperformed IPO projections by 3.2% and 17.8% respectively. The trust’s total Distribution Per Unit (DPU) of 4.88 Singapore cents for FY19 also exceeded its IPO projection by 5.2%.
Tong Yew Heng, CEO of the Manager of NetLink Trust, said its financial performance and distributions to unitholders exceeded IPO projections for the year, driven mainly by a strong increase in residential connections and diversion project income. Residential connections increased by 11.3% year-on-year to 1,327,732 connections, while non-residential and non-building address point (NBAP) connections saw stable growth.
“For the upcoming financial year, we expect revenues from key connection services to be higher than that of FY19, driven by higher residential connections and installation-related revenues,” he added in in the trust’s 13 May 2019 results statement.
The Group will continue to invest to expand its network and will also utilise Capex Reserve on projects that will improve the network’s capability and resiliency. Therefore, FY20 capital expenditure is likely to come in higher YoY, the trust said.
In his letter to unitholders published in NetLink’s latest annual report released earlier this week, Tong said he expects residential fibre connections to grow closer to 100% penetration in the medium term, from about 88% today. The trust is also monitoring the development of Singapore’s 5G mobile network and how the use of its extensive fibre network could speed up the deployment of this new technology, and at the same time, bring about a cost-effective outcome for its customers.
StarHub Continues Brand Revamp, Eyes Cyber Security Boost
For the first quarter ended 31 March 2019, StarHub reported a net profit after tax of S$49.3 million, down 23.3% YoY due to lower revenues from its mobile and pay TV operations as well as higher operational expenditure from its cyber security joint venture. Revenues rose 6% YoY to S$596.8 million, driven by strong contributions from its network solutions and cyber security services.
Looking ahead, StarHub said it expects the Group’s 2019 service revenue to be stable or decline 2% YoY, while service EBITDA margin is likely to be between 30% to 32%. Meanwhile, the Group continues to implement its transformation programme aimed at boosting customer experience, StarHub CEO Peter Kaliaropoulos said in its 3 May 2019 results statement. This includes the revitalisation of its brand image, simplifying mobile and TV offers, as well as providing clarity with all fees.
It is migrating tens of thousands of cable customers every month to fibre TV, while cyber security opportunities are increasing. A combination of direct initiatives and those with partners are also helping StarHub deliver more data and mobile services to small-and-medium businesses (SMBs) and major accounts, he added.
