SingTel

I will look for debt/EBITDA to access its leverage level among telcos. It reflect the ability to repay debt with its earning power. Base on FY2011 AR (for each of them)

Singtel : 0.8
Starhub : 0.8
M1 : 0.9

It is not much a difference among them.

Both Starhub and Singtel issue notes in FY2012 which may produce different numbers in FY2012

(14-10-2012, 09:07 PM)CityFarmer Wrote: I will look for debt/EBITDA to access its leverage level among telcos. It reflect the ability to repay debt with its earning power. Base on FY2011 AR (for each of them)

Singtel : 0.8
Starhub : 0.8
M1 : 0.9

It is not much a difference among them.

Both Starhub and Singtel issue notes in FY2012 which may produce different numbers in FY2012

debt/EBITDA is a leverage ratio more to access whether a company is a going concern. It does not apply well to access whether a company is able to maintain or grow its dividend.

since we can be confident that Starhub is a going concern. so a leverage ratio based on debt/ebitda is pretty useless.

so far, my take is that Starhub's share price is supported by its dividend. so whether its dividend can be maintained is more important whether Starhub can service/repay its debt.

In the scenario that Starhub cut its dividend to service its debt, naturally, I would believe that the market will price Starhub lower just because of its lower dividend.

from this point of view, Starhub's dividend is vulnerable in the following situations:
1) interest rate rises
2) banking/capital market not willing to extend its debt
3) supplier credit is limited
4) revenue/margin is hit

In the above 4 scenarios, I am pretty sure that Starhub can survive, probably, dividend will be cut.

But if we access the above 4 scenarios on Singtel, the risk is lower than Starhub.

(14-10-2012, 08:47 PM)freedom Wrote: I did not look at M1, but for Singtel, its leverage is not high in general. probably less than 1 even including associates and joint ventures' balance sheet.

It seems that Singtel is not aggressively pursuing mobile customers from the other 2 operators. Singtel spent 400 million on BPL to after Starhub's pay-TV with mioTV revenue of 100 million for FY2012, which is crazy. Wonder what will happen if Singtel do this kind of thing to acquire mobile customers. Singtel does have enough financial power to lower its mobile profit margin to after customers from the other 2 operators, but it did not do it. maybe because of regulatory issue?

Not vested in any telco.
1. the 400m supposedly spent by singtel is spread over 3 yrs.
2. When you subscribe for Mio Tv, u need to subscribe for their internet service too.
So, miotv could be a loss leader for other services provided by Singtel

Singtel managed to get BPL for the third time

Source: http://www.todayonline.com/Hotnews/EDC12...-hat-trick

(14-10-2012, 11:11 PM)camelking Wrote:

(14-10-2012, 08:47 PM)freedom Wrote: I did not look at M1, but for Singtel, its leverage is not high in general. probably less than 1 even including associates and joint ventures' balance sheet.

It seems that Singtel is not aggressively pursuing mobile customers from the other 2 operators. Singtel spent 400 million on BPL to after Starhub's pay-TV with mioTV revenue of 100 million for FY2012, which is crazy. Wonder what will happen if Singtel do this kind of thing to acquire mobile customers. Singtel does have enough financial power to lower its mobile profit margin to after customers from the other 2 operators, but it did not do it. maybe because of regulatory issue?

Not vested in any telco.
1. the 400m supposedly spent by singtel is spread over 3 yrs.
2. When you subscribe for Mio Tv, u need to subscribe for their internet service too.
So, miotv could be a loss leader for other services provided by Singtel

nonetheless, 400 million spread over 3 years, still more than 100 million per year. IIRC, it is US$, not S$. in FY2011, mio TV revenue is less than 100 million.

as for additional revenue for singnet due to mio TV, it is difficult to differentiate. The singnet broadband signed for mio TV can be used as normal broadband as well. to simply add it into mio TV revenue, seems not right, either.

But it speaks volumes about the will of Singtel to acquire pay-TV customers from Starhub. Only if Singtel can be so willing to acquire mobile customers from the other operator as well.

(14-10-2012, 10:54 PM)freedom Wrote: debt/EBITDA is a leverage ratio more to access whether a company is a going concern. It does not apply well to access whether a company is able to maintain or grow its dividend.

since we can be confident that Starhub is a going concern. so a leverage ratio based on debt/ebitda is pretty useless.

so far, my take is that Starhub's share price is supported by its dividend. so whether its dividend can be maintained is more important whether Starhub can service/repay its debt.

In the scenario that Starhub cut its dividend to service its debt, naturally, I would believe that the market will price Starhub lower just because of its lower dividend.

from this point of view, Starhub's dividend is vulnerable in the following situations:
1) interest rate rises
2) banking/capital market not willing to extend its debt
3) supplier credit is limited
4) revenue/margin is hit

In the above 4 scenarios, I am pretty sure that Starhub can survive, probably, dividend will be cut.

But if we access the above 4 scenarios on Singtel, the risk is lower than Starhub.

Debt/EBITDA is applicable to access dividend sustainability with concern of debt.

Having said so, I do doubt on sustainability of Starhub's dividend, not too much on its debt, but its future FCF

(15-10-2012, 09:57 AM)CityFarmer Wrote: Debt/EBITDA is applicable to access dividend sustainability with concern of debt.

Having said so, I do doubt on sustainability of Starhub's dividend, not too much on its debt, but its future FCF

please enlighten me how you access dividend sustainability using debt/ebitda ratio.

I can give you two companies with the same DEBT/EBITDA, such as Singtel and Starhub. maybe even the same DEBT and the same EBITDA, but different capital structure, one with total liabilities/equity of 1 and the other 100.

I wonder how you can tell which dividend is more sustainable than the other one without looking further into its capital structure, such as total liabilities/equity?

(15-10-2012, 10:12 AM)freedom Wrote:

(15-10-2012, 09:57 AM)CityFarmer Wrote: Debt/EBITDA is applicable to access dividend sustainability with concern of debt.

Having said so, I do doubt on sustainability of Starhub's dividend, not too much on its debt, but its future FCF

please enlighten me how you access dividend sustainability using debt/ebitda ratio.

I can give you two companies with the same DEBT/EBITDA, such as Singtel and Starhub. maybe even the same DEBT and the same EBITDA, but different capital structure, one with total liabilities/equity of 1 and the other 100.

I wonder how you can tell which dividend is more sustainable than the other one without looking further into its capital structure, such as total liabilities/equity?

Since your ultimate concern is on Starhub's debt level, then bringing in indicator of debt is applicable, isn't it?

Debt/EBITDA is not a commonly used indicator for dividend sustainability, but debt is also not a common concern for dividend sustainability either.

IMO, FCF is the more applicable to access dividend sustainability

(15-10-2012, 10:28 AM)CityFarmer Wrote:

(15-10-2012, 10:12 AM)freedom Wrote:

(15-10-2012, 09:57 AM)CityFarmer Wrote: Debt/EBITDA is applicable to access dividend sustainability with concern of debt.

Having said so, I do doubt on sustainability of Starhub's dividend, not too much on its debt, but its future FCF

please enlighten me how you access dividend sustainability using debt/ebitda ratio.

I can give you two companies with the same DEBT/EBITDA, such as Singtel and Starhub. maybe even the same DEBT and the same EBITDA, but different capital structure, one with total liabilities/equity of 1 and the other 100.

I wonder how you can tell which dividend is more sustainable than the other one without looking further into its capital structure, such as total liabilities/equity?

Since your ultimate concern is on Starhub's debt level, then bringing in indicator of debt is applicable, isn't it?

Debt/EBITDA is not a commonly used indicator for dividend sustainability, but debt is also not a common concern for dividend sustainability either.

IMO, FCF is the more applicable to access dividend sustainability

my concern is more about the percentage of debt in its capital structure, rather than whether it can service its debt. As a current shareholder of Starhub, which one do you concern more? DEBT/EBITDA or other leverage ratio? of course, our assumption is Starhub is not a going concern and its price is supported by its dividend.

Of course, FCF is important, but here we are talking about leverage and how high leverage is affecting Starhub's dividend sustainability all other things being equal including FCF, aren't we?

Correct me if I am wrong. debt is a big decision whether dividend is sustainable. If everything else is equal, higher debt definitely will weaken the dividend sustainability.

(15-10-2012, 12:04 PM)freedom Wrote: my concern is more about the percentage of debt in its capital structure, rather than whether it can service its debt. As a current shareholder of Starhub, which one do you concern more? DEBT/EBITDA or other leverage ratio? of course, our assumption is Starhub is not a going concern and its price is supported by its dividend.

Of course, FCF is important, but here we are talking about leverage and how high leverage is affecting Starhub's dividend sustainability all other things being equal including FCF, aren't we?

Correct me if I am wrong. debt is a big decision whether dividend is sustainable. If everything else is equal, higher debt definitely will weaken the dividend sustainability.

I am not a shareholder of Starhub, but i am shareholder of another telco (M1). Which one do I concern more? I already mentioned in my previous posting, debt/EBITDA IMO, Debt/EBITDA is a better indicator vs debt/Equity for telco business model

The concern of debt service or dividend payout capability will ultimately lies on earning power (i.e. ability to generate cash). One company with gearing of 100% (debt/equity = 1) but earning power of 50%, Another company with gearing of 10% (debt/equity = 0.1) but earning power of 5%, which one do you think it's dividend payout is more sustainable?