Cory Diary : Singtel 2017-0714

Let's start with some data background of Singtel. I do this fast. Apologize for any error and DYODD.

Since 2013, Singtel has been fluctuating within a big band of $3.3 to $4.5 range. During this time, annual distribution is about 17 cents ( not exact but growing ) which easily totaled roughly 90 cents. Right now the stock price is 60 cent below the top range. And current yield is about 4.4%. Revenue kind of flat.

About S$3B FCF annually. Last year we see a little dip to about dividend support level despite no noticeable increase in capex. As for Netlink Trust, never mind about the regulatory requirement. Netlink Trust IPO comes as a right time for Singtel. At 81 cents, they raised more than $2B which not only cover years of dividend support but also the increase of spectrum cost. On top of this,  $50 M recurring income from it.

I thought this is master stroke on realizing the value of Singtel asset. Considering Singtel retained 24.99%, Netlink still rest securely under Temasek hands. How long can the music last, let's evaluate again later with more quarterly reports.


Cory
20170714

Cory : Singtel

Realistically speaking I agree with Singtel that there is no need for 4th Telco in SG. The reason is pretty straight forward. Neither M1 nor Starhub are credible competitors to Singtel. So what makes us think an addition of 4th or even 5th will helps bring competition to the table ?

If Singtel want to gobble up the whole SG market, they actually can if we truly believe in free market logic. Singtel wouldn't unless they prepare to face the wreath of the regulator and residence. Their strategy will be such as to secure just enough market share while the rest fight among themselves for the remainder. And that's what will happen when the 4th comes in. Which is why the scenario is so bad for M1 and Starhub.

The market will then reach a new equilibrium, and rates will then slowly returns to norm. They can do a 5th or 6th ... it doesn't really matter to Singtel being a regional wide telco.

The above Logic make sense till TPG comes in later into the game. Having a strong FCF in the Australia Market, this pose a serious challenge to Singtel domination in Singapore. I can sense the Singtel CEO no longer smiling as she may have to battle TPG in both fronts. Nevertheless Singtel is still a huge force to reckon with considering TPG FCF could also be significantly dented if Optus do something.

One thing for sure, the journey is not going to be fun for M1 and Starhub.


Cory
20161219