SingTel

OCBC report dated 27-Sep-12,


SHARE SALE MINOR HICCUP
- Temasek selling 400m shares
- Temporary knee-jerk reaction
- Adding value to mobile business

Temasek selling 400m shares
Temasek Holdings has entered into an agreement to sell 400m shares in SingTel as part of its portfolio rebalancing. We understand that it has a upsize option to sell another 100m shares. According to newswire reports, the share sale was done at S$3.20 each, which is a 3.9% discount to Tuesday’s S$3.33 close, and also at the lower end of the indicative S$3.20-3.25 range. As expected, the news resulted in a negative knee-jerk reaction, causing SingTel’s share price to open some 5.1% lower at S$3.16.

Not indicative of SingTel’s business prospects
Meanwhile, Business Times reported that the sale was a result of a “reverse inquiry” from bankers, suggesting that the move is more opportunistic (given that the share price has risen 6.7% YTD) rather than a direct reflection of SingTel’s business prospects. In any case, we note that Temasek will be barred from selling more shares for 120 days after completing the sale. Temasek will hold a 51.3% stake in SingTel (assuming 500m shares are sold), and the telco will remain the largest company in its portfolio by market capitalization.

Good demand for iPhone 5
Separately, demand for the new iPhone 5 over the weekend has been very positive. We visited several SingTel outlets – including some of its competitors – and the queues were very long indeed. While the higher subsidies for the iPhone 5 may initially weigh on margins, the new contracts with less generous data bundles and the faster LTE access speed should eventually bump up ARPU and margins. SingTel has also made several acquisitions in the mobile service space – the latest being a S$3m stake in mobile game firm – and this should allow it to add value to its mobile business.

Maintain BUY with S$3.61 fair value
Despite the negative knee-jerk reaction, we believe that investors should not read too much into the share sale. Instead, we continue to like its defensive business and relatively decent dividend yield of ~5%. Maintain BUY with an unchanged S$3.61 fair value.

(25-09-2012, 03:52 PM)CityFarmer Wrote: Another acquisition on mobile content provider

http://info.sgx.com/webcoranncatth.nsf/V...30031B141/$file/521-sgx.pdf?openelement

Acquisition and subscription of shares in TheMobileGamer Pte. Ltd. TMG is a platform provider that is in the business of aggregating, distributing, licensing and developing mobile gaming software

- Acquisition of S$1.8 million (approximately US$1.5 million)
- Subscription of 11,481,056 new Series B preferred shares at S$0.107 per share, i.e. ~$1.2 million

I just realize today that my wife younger brother is working in TMG. Wow is he going to become rich

(29-09-2012, 09:19 PM)Bibi Wrote:

(25-09-2012, 03:52 PM)CityFarmer Wrote: Another acquisition on mobile content provider

http://info.sgx.com/webcoranncatth.nsf/V...30031B141/$file/521-sgx.pdf?openelement

Acquisition and subscription of shares in TheMobileGamer Pte. Ltd. TMG is a platform provider that is in the business of aggregating, distributing, licensing and developing mobile gaming software

- Acquisition of S$1.8 million (approximately US$1.5 million)
- Subscription of 11,481,056 new Series B preferred shares at S$0.107 per share, i.e. ~$1.2 million

I just realize today that my wife younger brother is working in TMG. Wow is he going to become rich

The owner will become richer definitely, not sure on employees, at most a bigger bonus end of this year

I don't think so. He is one of the pioneer who work in TMG and is given shares as reward. He holds the title CTO in TMG.

(29-09-2012, 09:56 PM)Bibi Wrote: I don't think so. He is one of the pioneer who work in TMG and is given shares as reward. He holds the title CTO in TMG.

Singtel will still be doing well. Telecommunication sectors are defensive and resililent because ppl will always need to communicate. And furthermore, they have a very strong position as they are controlling India's Airtel, Australia's Optus and a few more other telcos.

5% yield. you will think that vodafone (0% withholding tax) is yielding 5%+ as wel. which is the better international telecom.

(30-09-2012, 03:59 PM)investingsgx Wrote:

(29-09-2012, 09:56 PM)Bibi Wrote: I don't think so. He is one of the pioneer who work in TMG and is given shares as reward. He holds the title CTO in TMG.

Singtel will still be doing well. Telecommunication sectors are defensive and resililent because ppl will always need to communicate. And furthermore, they have a very strong position as they are controlling India's Airtel, Australia's Optus and a few more other telcos.

Comparing other players in Telecommunication sector in Singapore, all having similar if not better yield. Will you still go with Singtel?

(01-10-2012, 10:54 AM)CityFarmer Wrote: Comparing other players in Telecommunication sector in Singapore, all having similar if not better yield. Will you still go with Singtel?

For me, at the right Price and the right Time (close to Dividend declaration time), I'm ok to be vested in any of the 3 TELCOs.

For SingTel, despite having the lowest Yield, the key attraction (when right price, right time condition is met) is the lowest Dividend Payout Rate. For FY12 (Mar) it was ~63% vs M1 80% for FY11 (Dec-11) and StarHub >100% since FY09 (Dec) ie. paying from FCF. For me, that may mean SingTel has some margin to either pay better dividends or maintain the DPS even if EPS declines.

(01-10-2012, 03:11 PM)KopiKat Wrote:

(01-10-2012, 10:54 AM)CityFarmer Wrote: Comparing other players in Telecommunication sector in Singapore, all having similar if not better yield. Will you still go with Singtel?

For me, at the right Price and the right Time (close to Dividend declaration time), I'm ok to be vested in any of the 3 TELCOs.

For SingTel, despite having the lowest Yield, the key attraction (when right price, right time condition is met) is the lowest Dividend Payout Rate. For FY12 (Mar) it was ~63% vs M1 80% for FY11 (Dec-11) and StarHub >100% since FY09 (Dec) ie. paying from FCF. For me, that may mean SingTel has some margin to either pay better dividends or maintain the DPS even if EPS declines.

Although Singtel price may not be expensive now. Not cheap either. But i think we should look at the bigger picture of why Temasek reducing its Singtel stakes and are also looking to reduce its stakes in Standard Chartered to raise capital.

It is an indicator that the bear may be coming.

(02-10-2012, 09:46 AM)investingsgx Wrote: It is an indicator that the bear may be coming.

Well, if it's an "indicator", then the question is did Temasek do the same before the GFC in 08? Else it is always easy to extrapolate in a biased manner