Author: tfwee
SingTel – OCBC
Testing resistance
– SingTel has rebounded as per our forecast on 15 July. The price rose into our forecasted resistance zone around S$3.60 – 3.68 over the last few trading sessions but failed to clear it.
– At this juncture, the reversal candlestick formations coupled with the strong resistance from the 50-day moving average and the downtrend line, suggest that SingTel’s upside is capped around the current levels.
– We expect the price to drift back towards the lower band of the wedge pattern around S$3.47-3.49. A break below this level would take SingTel down towards its support at S$3.16.
– We advocate caution on SingTel at this stage, and advise waiting for a convincing break above the resistance level or a break below the lower band of the wedge pattern before taking up a relevant trading strategy.
M1 – BT
M1 to offer fixed broadband from today
IN a move that gives more choice to broadband customers, Singapore’s smallest telco, MobileOne (M1), announced yesterday that it will offer fixed broadband services from today.
With this, M1 joins StarHub and Singapore Telecommunications (SingTel) in offering both fixed and mobile broadband services. M1 was the first telco to introduce mobile broadband service in Singapore in 2006.
According to M1, it will offer four unlimited data plans. The lowest offers 10 megabits per second (mbps). The other three speeds are 15 mbps, 30 mbps and 100 mbps. With the 100 mbps option, M1 joins StarHub in offering the highest connection speeds in Singapore today.
The promotional price for the 10 mbps plan is $43.50 a month, with existing M1 customers paying $40.60 a month. For the 100 mbps plan, the promotional price is $88.50 a month with existing M1 customers paying $76.70 a month.
Customers will be offered a plug and play cable modem as part of the launch promotion when they sign up for the service.
M1 fixed broadband will be available to all homes with cable access points or which are cable-ready, according to an M1 spokesman.
He added that the service is capable of achieving download speeds of up to 100 mbps and upload speeds of up to 2 mbps.
The spokesman added that fixed broadband customers will be connected to M1’s infrastructure via StarHub Cable’s open access network. ‘The traffic is then carried from our network to the Internet.’
When asked about what additional investment was done by M1 for this service, the spokesman said that routers and other such enabling hardware were added to the company’s existing infrastructure to enable this.
M1 and StarHub are both part of the Infinity Consortium, along with Hong Kong-based City Telecom (HK) Ltd. The consortium is one of the two bidders for building Singapore’s prestigious Next Generation National Broadband Network (NGNBN).
Neil Montefiore, M1’s CEO, said the company is repositioning itself for the future as it develops new businesses anchored on its core competencies.
‘The launch of M1 fixed broadband is an important step in our planned transformation from a single-play mobile operator to a dynamic multi-play operator with interests in both the mobile and fixed sectors,’ he added.
Commenting on the M1 offerings, a StarHub spokesman said: ‘The landscape for broadband services is set to change even more radically in the coming years with the Government’s NGNBN initiative.
‘This recent move by our Infinity consortium member should come as no surprise, as we all prepare for new challenges and opportunities. Singaporeans can always count on StarHub to remain committed to offering a strong value proposition to customers, especially those who want fast broadband, mobile, fixed line, and CableTV services from a single service provider.’
A SingTel spokesman noted: ‘We welcome competition and will continue to ensure that our quad-play service offerings – fixed, broadband, mobile and TV – will delight and meet our customers’ needs.’
For more information about M1 fixed broadband, visit: www.m1.com.sg/broadband.
SingTel – BT
SingTel says it’s in talks with China telco
SINGAPORE Telecommunications said talks are in progress for it to invest in a Chinese operator, part of plans to drive earnings through emerging markets.
‘We track the developments closely,’ chief executive Chua Sock Koong said in an interview at a conference in Singapore yesterday. She declined to elaborate because it was ‘too premature’ to identify target companies.
Ms Chua, who took the helm in April last year, has said she aims to expand growth by investing in emerging markets including Africa.
The SingTel CEO, who reiterated yesterday interest in investing in the Middle East, faces the challenge of raising earnings amid currency fluctuations and intensifying competition in Australia, its largest market.
The company is in discussions for a possible investment in operators in China, the world’s biggest telephone market by users, Ms Chua said on June 17.
China Telecom Corp, the nation’s largest fixed-line company, said in June it was in talks to sell a stake to a strategic investor.
Ms Chua said on April 15 that SingTel was looking at investments in the Middle East as the company favours emerging markets with large populations and low mobile-phone usage.
‘We continue to look to see if there are significant opportunities,’ she said. — Bloomberg
SingPost – UOBKH
Slower Growth Ahead; HOLD For Yield
Net profit up 2.9% to S$39.5m. Singapore Post’s (SingPost) revenue grew 4.6% yoy to S$120.9m in 1QFY09, with the mail segment contributing 73% of total revenue. The core business, the mail segment, saw modest revenue growth of 2.4% yoy and flat international mail growth, mainly driven by 4% yoy growth in domestic mail. EBIT margin widened to 40.6% in 1QFY09 (39.3% in 1QFY08), partly due to less selling expenses and slower growth of volume-related expenses.
Competition overhang. Under the competition framework set by Infocommunication Development Authority of Singapore (IDA), SingPost will continue to hold the master keys but it must provide other postal service operators with access to its distribution network. How IDA regulates Reference Access Offer (RAO) rates and executes the new framework will be closely watched. Four new entrants have been granted postal services licences.
Not so defensive against economic slowdown. According to IDA, business users account for more than 90% of total domestic mail. Therefore, a slowdown in business activities would hurt SingPost’s business. This is evidenced by the slight dip in mail volume handled in FY03 (Apr 03-Mar 04) when Singapore was hit by SARS. The moderated revenue growth in the past few quarters, especially from the mail segment, signals an economic slowdown. If economic uncertainties continue, SingPost could see slower growth ahead.
Decent yield warrants a HOLD. We downgrade SingPost to HOLD with a fair price of S$1.07. Our valuation is based on the DCF model (WACC: 5.7%; terminal growth rate: 0.5%). We suggest accumulating at S$0.96 or below. Upside risk could come from a special dividend payout.
StarHub – CIMB
A difficult 2Q
Results preview
Margin compression. We do not anticipate any surprises in StarHub’s 2Q08 results, which are scheduled for 6 Aug. We expect 2Q08 core profit to slip 1.2% qoq and 2% yoy. Although revenue should grow 2.4% qoq or 12% yoy, EBITDA margins are expected to come in at 30.5% in 2Q, vs. 31.3% in 1Q, as we believe StarHub’s margins will be compressed by higher subscriber retention and acquisition costs ahead of mobile number portability (as with MobileOne) and SingTel’s aggression in building market share. All in, we expect results to be in line with our expectations of FY08 revenue growth of 10% and core net profit nudged up 1% yoy.
Margin risks. Although churns from mobile number portability have been fairly limited thus far, a jostling for subscribers ahead of implementation could have squeezed margins in 2Q, on higher subscriber and acquisition costs. M1’s subscriber and retention costs rose 22.8% qoq and 38% yoy in 2Q while its core EBITDA margins declined 1.3% pts qoq.
Steady dividends. We expect StarHub to declare a DPS of 4.5cts for 2Q, unchanged from 1Q. We do not expect substantial increases in payouts until the results of its bid for the National Broadband Network’s Netco is known. We expect OpenNet, the SingTel-led consortium, to win the bid.
Prepaid impaired by competition. We will be looking for indications of any bottoming out for prepaid metrics:
• StarHub’s prepaid subscriber market share slipped 2% pts qoq to 34.1% in 1QCY08.
• Prepaid ARPU fell to S$22 in 1QCY08 from S$27 in 4QCY06.
This is worrisome, considering that prepaid revenue accounted for about 11.7% of StarHub’s 1QCY08 revenue. We expect these trends to persist in the foreseeable future until SingTel eases off its pursuit of market-share gains.
Valuation and recommendation
Maintain earnings forecasts, NEUTRAL rating and target price of S$3.20, still based on DCF valuation (WACC of 7.5% and terminal growth rate of 1.7%). Pressure on margins and market share exerted by a combative SingTel on top of the erosion of its broadband and prepaid franchise weighs on the stock.
On the flipside, attractive yields should cap downside risk for StarHub, in our opinion. Our above-consensus yield outlook of 9.4% for CY08 is the highest for Singapore telcos. This yield outlook is supported by free cash flow yield estimates of 9.3% for FY08 and expectations of OpenNet winning the bid for NBN’s NetCo. StarHub remains our preferred yield stock over M1 due to its more diversified earnings and higher management commitment to return capital than M1.