Thursday, March 1, 2018

Singtel, M1 and Starhub – Which Should I Invest In?

Once the darlings of many of the Singapore retail investors for their defensive nature and high dividend yield, telco counters’ share price had come down drastically after the announcement of the 4th Telco.

Market share of these 3 incumbent telco counters are further reduced by the introduction of Mobile Virtual Network Operator (MVNO), Circle Life, Zero Mobile, Zero1 and maybe MyRepublic.

However, being a believer of value investing and contrarian investing and maybe moat investing, I still believe that every counter does have a fair price.

When the negativity of a counter is at its highest, when no one talks about it anymore, when the share price has been stagnant for a long time, the bottom could possibility been reached. I believe that is when one should pounced on the counter.

However, these 3 counters are currently trading at their multi-year low share price. Which one should I choose?

Rather than assets, my opinion is these Telco should be measured by their ability to generate earnings and their FCF generation.

Based on my Scorecard criteria for the 3 Telco:
Based on the latest share price
*Do note that FCF is based on an average of 5 years.
**Earnings is based on the trailing twelve months.

As per the selected scorecard criteria, I will have preferred to invest in M1. Although Singtel has the lowest PE ratio among the 3 Telco, but this is most probably due to their huge earning gain in the IPO of Netlink Trust.

To enhance my view on M1, I had previous written extensively on the change in direction of M1 business. Their first mover advantage in the IoT business (among the telcos) should be able to compensate their drop in earnings in this traditional telco business space.

Do note that the author is vested in M1 and Singtel.

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