Singtel, Starhub, M1

Singapore telcos are among the favorite local stocks for many passive income investors. Not only did the 3 major telcos, namely Singtel, Starhub and M1, offer reasonable dividend yield , they are also relatively low-risk in nature which make them particularly attractive in times of uncertainty such as now. In this post, I will compare, very briefly, the fundamentals of the 3 telcos and highlight some of the economic outlook and challenges faced by the 3 telcos.

Financial Highlights

	Singtel ($m)	Starhub ($m)	M1 ($m)
Price	S$3.17	S$3.27	S$2.48
Revenue	18,071	2,312	1064.9
Net Profit	3,825	316	164.1
Profit Margin	21.17%	13.67%	15.40%
Dividends		343	161.32
Dividend per Share	15.8c	20c	14.5c
Dividend Yield	4.98%	6.12%	5.85%
Current Assets	6,555.2	534.8	260.63
Current liabilities	8540.8	903.3	310.69
Current Ratio	0.77x	0.59x	0.84x
Non-Current Assets	32,727.1	1,188.30	717.94
Non-Current liabilities	6391.2	797.2	322.55
Total Equity	24,350.3	22.6	345.33
Capital Expenditure	2,005	246.5	102.5
Capex/Revenue	11.10%	10.66%	9.63%
Free Cash Flow	4,038	449.7	161.3
EPS	24.02c	18.4c	18.1c
ROE	16.00%	281.85%	52.50%
ROA	9.90%	18.34%	16.77%
ROI	17.60%	43.90%
PE Ratio	13.2x	17.77x	13.7x
Market Cap	49,200	5,610	2,260
Gearing Ratio	19.80%	95.53%	45.77%
Interest Cover	21.8x	21.3x	52.1x

The financial information above is obtained from the latest annual financial report of each respective telco.

As seen from the table, Starhub still offers the highest dividend yield despite the recent surge in its price (11.99% YTD), however, it also adds considerably to the already high PE ratio of Starhub, trading at a significant premium, or in another word, more expensive compared to Singtel and M1. 

Singtel
Revenue Compositions


EBITDA Compositions

• Diversified earnings with strong global presence.
• Regional markets such as Thailand, Banglades, India, Africa, Indonesia and Philippines have large population, low mobile penetration rate and rising affluence. Strong growth potential.
• Subjected to foreign exchange and geopolitical risks.

Starhub
Revenue Compositions
 

• Low churn rate (Mobile: 1.1%, Broadband: 1.2%, Pay TV: 1.1%)
• Continuous growth in consumer base over the last 5 years
• falling Average Revenue Per User (ARPU) in Pay TV, Broadband and Fixed Network.

M1
Revenue Compositions

•  comparatively less diversified. 
• Falling ARPU for data plan and Prepaid

Outlook

As Singapore continue to develop itself as a financial and business hub, the demand for high quality telecommunication services will most likely remain high. In addition, with the current labor policy by the government, Singapore population continue to rise, giving a boost to domestic demand for mobile devices and services. However, with the increasing usage of VOIP such as skype or Viber and instant messaging such as WhatsApp, it post a threat particularly for M1, to the sustainability of national/international calls as a significant source of revenue with evident from the falling ARPU.

Singtel on the other hand is well positioned to tap onto the growth story of many developing countries with its strong presence in the regional market. With increasing affluence, not only will the mobile penetration rate continue to grow, Singtel can also potentially capture the broadband growth in these developing nations. However, Singtel's presence in the regional market also exposes itself to political instability and natural disasters which may materially disrupt business and damage infrastructural in the affected area.

Capital Expenditure (Capex) remains as a key operating cost for the telecommunication industry as infrastructure and technology are rapidly improving in the sector. Major capital expenditure included the expansion and enhancement of mobile networks to support customer and data growth and core infrastructure.