ST's share price has declined 13% from its 52-week high of ~S$4.0. ST has also underperformed the STI by 5% year-to-date.
ST's share price is currently testing a key 5-year support (Figure 1). We believe share price at current levels can be supported by its 5.2%/5.6% consensus dividend yield for FY19/20F.
Valuation & Action
Attractive 5% dividends supported by healthy FCF. SingTel typically pays between 60-75% of its core net profit as ordinary dividends, which has translated to 16.8 SG cents for FY14-15 and 17.5 SG cents for FY15-17. The selldown offers an attractive opportunity to accumulate ST given its forward dividend yields of 5.3%/5.6% for FY19/20F. It is due to report its 3Q18 earnings this Thursday (8-Feb) before market opens.
Entry of Singapore's fourth telco may erode margins more than expected. The business shift to ICT will compete with big global technology companies, which may lead to more capex requirements to stay competitive. Higher capex may impact FCF and its ability to maintain a stable dividend payout. (Read Report)
Source : KGI Research