So What About Singtel? (Z74)

I had a few lots of Singtel (Z74) in my portfolio a while ago, which I liquidated for a small profit when I wanted to park my money somewhere else. I have a habit of re-examining my past holdings to see if there is good cause for re-investment. I've already pumped some more money into ST Engineering. Now, I have my sights set on Singtel once again.

Source: Google Finance

Singtel's share price dipped in December of 2016 (alongside competitors M1 and Starhub) as TPG Telecom won the bid to become Singapore's 4th Telco. After decent 3Q results, which saw net profit climb 4% to S$994 million, we saw Singtel's stock price climb back up to 3.90+ levels, leaving M1 and Starhub in the dust with dismal financial results. However, in the past few weeks, Singtel's price has dipped once more with international fund managers selling off their Singtel holdings due to concerns about increased regional competition. Out of the 3 local Telcos, Singtel has the most internationally-diversified portfolio, with stakes in Indonesia (Telkomsel), Australia (Optus), and India (Bharti Airtel), among other areas. These markets have come under attack, as TPG Telecom stepped up expansion plans in Australia, directly threatening Singtel-owned Optus. UK's Vodafone completed a merger of its Indian subsidiary with a competitor, forming India's largest wireless telecom carrier and unseating Bharti Airtel, the former leader, in the process.

Singtel and its holdings are facing increased pressure and competition, both domestic and offshore. TPG's entrance as the fourth Telco directly threatens Singtel's hold on the Singapore market, while heightened international competition has thrown their regional holdings and stakes into disarray. Mr. Sat Duhra, a fund manager for Henderson Global Investors, which recently divested their Singtel holdings, mentioned increased competition as their main reason for selling the stock. "It's going to face some short-term pressure," he said, and I do agree with this analysis. Singtel will need to look towards other areas for investment and development. Note the phrase 'short-term pressure'. The Netlink Trust (NLT) IPO would be very important for Singtel - divesting their holdings in NLT would give Singtel a massive warchest with which to pursue expansion with, and would raise their stock price accordingly. Singtel has been given until April 2018 to divest their stake to less than 25%.

As an aside, I would like to see if Singtel is willing to increase funding/development in their cyber security (Trustwave) and data analytics (DataSpark) arms  - my portfolio is geared towards the "Smart Nation" idea, and as such, I would be interested in companies with a strong focus on data/technology/cybersecurity. 

In the meantime, Singtel's results will be out on Thursday (May 18), and I am expecting to see an overall drop in net earnings and operating profit. I would expect this to bring the price down slightly. If Singtel moves back down to the high 3.60 - low 3.70 region, I would consider picking some lots up. 

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My investments into SGX have not panned out as I'd hoped. I will be taking a small loss as I unload my SGX shares while I wait for another opportunity.

Until next time.

Creed