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Singapore Telecoms Sector - Nowhere near the bottom

Shared By Stock Fanatic on Saturday, July 14, 2018 | 14.7.18

Mobile: More downside to pricing. We believe TPG is likely to aggressively target the low-tier and mid-tier data segments as the data price curve has flattened over the last three years. Further, legacy revenues (caller id and voice overage) are set to decline as TPG is expected to charge only for data. Our global peer RoIC comparison shows that the Singapore telecoms market continues to see an excess return, reflecting the potential for further price cuts. We expect the mobile sector’s revenue to decline at a three-year CAGR (2017-20E) of c.5% (post IFRS 15), mainly led by the decline in ARPU. Read More

Fixed line: SingTel to maintain its dominance. SingTel is the market leader in the fixed-line sector with a market share of c.78% as of 2017. Despite the rising competition, we expect SingTel to maintain its dominance in the sector and also forecast the company to lose a mere 40 bp market share over the next three years. We expect growth in the sector to be mainly led by the Broadband and Enterprise segments as Pay TV is facing structural headwinds. We believe the entry of TPG may reinvigorate competition in the Broadband segment in the medium term.

SingTel - Technical Analysis
Daily Chart
StarHub - Technical Analysis
Daily Chart
M1 - Technical Analysis
Daily Chart
StarHub's current dividends not sustainable. Though StarHub’s and M1’s stock prices have corrected by c.56% and c.55%, respectively since Jan-2015, we maintain our UNDERPERFORM rating on both as we believe that the current stock prices are not fully baking in the increasing competition. We believe that StarHub’s current annual dividend of S¢16.0/sh is not sustainable and, hence, forecast dividends to decline to S¢10.0/sh 2019E onward. SingTel is our preferred pick. We have cut our 2018-20E EPS for M1, StarHub and SingTel by 0-14%, 3-21%, and c.3% respectively, thereby cutting our target prices by c.10%, c.28%, and c.2%, respectively.

Source : Credit Suisse Asia Pacific Equity Research
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Posted on Saturday, July 14, 2018 | 14.7.18
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