SingPost – Lim and Tan
• The close yesterday is only 7 cents away from its peak of $1.30 reached in mid-07.
• The “boring” company has well outperformed SingTel, which still owns 25% of it: Sing Post started the year at $1.02 and Sing Tel at where it is currently ($3.10 yesterday).
• One development which we would not rule out is Sing Tel divesting or reducing its stake in Sing Post. (Sing Tel sold 95 mln Sing Post shares on Dec 12 ’05 at $1.107 each.)
• Any impact is however unlikely to be significant given that the overhang has not been an issue all these years. Besides, the stake worth almost $600 mln is of little strategic importance to Sing Tel, with a market cap of $almost $50 bln.
• The other development of likely significance is the government land tender in Eunos right next door to the Post Centre, which Sing Post had hoped to sell before being jettisoned because of the financial crisis. The land tender is expected before end 2010.
• Even if the stock were to drop on news of share placement by Sing Tel, a new “base” / support has been established at $1.13, the price at which SingPost has, between Aug 12th and 31st, bought back 8.597 mln shares. (All, except the buy-back of 1.968 mln shares on Aug 19th was at $1.12 a share.)
• We expect the 2007 peak to tempt some to take profit / sell. At $1.30, yield would be 4.8%.
SingPost – Lim and Tan
• The close yesterday is only 7 cents away from its peak of $1.30 reached in mid-07.
• The “boring” company has well outperformed SingTel, which still owns 25% of it: Sing Post started the year at $1.02 and Sing Tel at where it is currently ($3.10 yesterday).
• One development which we would not rule out is Sing Tel divesting or reducing its stake in Sing Post. (Sing Tel sold 95 mln Sing Post shares on Dec 12 ’05 at $1.107 each.)
• Any impact is however unlikely to be significant given that the overhang has not been an issue all these years. Besides, the stake worth almost $600 mln is of little strategic importance to Sing Tel, with a market cap of $almost $50 bln.
• The other development of likely significance is the government land tender in Eunos right next door to the Post Centre, which Sing Post had hoped to sell before being jettisoned because of the financial crisis. The land tender is expected before end 2010.
• Even if the stock were to drop on news of share placement by Sing Tel, a new “base” / support has been established at $1.13, the price at which SingPost has, between Aug 12th and 31st, bought back 8.597 mln shares. (All, except the buy-back of 1.968 mln shares on Aug 19th was at $1.12 a share.)
• We expect the 2007 peak to tempt some to take profit / sell. At $1.30, yield would be 4.8%.
SPH – DBSV
Cash falling from the Sky
• SPH estimated to have collected S$429m cash from Sky11 on TOP, equating to 27Scts/share
• Final/special dividend could exceed consensus’ expectations; we expect 24 Scts/5.7% final yield
• Buy ahead of full year results on 12 Oct. Reiterate Buy, SOP backed TP raised to S$4.52
Expect above-consensus final dividend; we look for 24 Scts final/special at full year. We are hopeful that final/special dividends to be declared at full year could beat consensus’ average of c.19 Scts. We have raised our final/special dividend expectation to 24 Scts premised on: (i) large cash inflow from Sky11; (ii) strong recovery in AdEx supported by economic growth; and (iii) historical track record of a payout of above 80% of PBIT.
Chunk of cash (S$429m) falling from the Sky. As at end 3Q10, SPH had S$663m in accounts receivables. Of this, we estimate that about S$530m were receivables from Sky@Eleven (Sky11), as the property development project was on the deferred payment scheme. Netting off 15% of sales proceeds (c.S$101m) to be collected upon transfer of legal title (expected about 1 year from TOP), we estimate that the Group will have collected/will be collecting c.S$429m in cash, equating to c.27 Scts/share or a cash yield of 6.4%.
AdEx shows strong YTD growth of 13.8%; dividend payout >80% PBIT. Operations remain firm, with Nielsen Media Research’s display & classified AdEx registering YTD growth (Sep’09-Jul’10) of 13.8%. July’s growth was 20% yoy. History has shown that dividend payout has also been above c.80% PBIT for the past 10 years, except for last year (76%). We believe this practice should continue, on the back of firm fundamentals and operations.
Buy ahead of results release (12 Oct); TP raised to S$4.52. We raised our sum-of-parts TP to S$4.52 as we factor in a higher valuation for Paragon, pegging a 10% discount to latest valuation (S$2.28bn), up from S$1.98bn previously. The possibility of a higher-than-expected final DPS (24 Scts or 5.7% yield) is attractive, leading to a full year dividend yield of 7.4% – 7 cents were paid at interim stage. We reiterate SPH as a top pick among our dividend yield plays, and a proxy riding on the economic recovery in Singapore.
SPH – DBSV
Cash falling from the Sky
• SPH estimated to have collected S$429m cash from Sky11 on TOP, equating to 27Scts/share
• Final/special dividend could exceed consensus’ expectations; we expect 24 Scts/5.7% final yield
• Buy ahead of full year results on 12 Oct. Reiterate Buy, SOP backed TP raised to S$4.52
Expect above-consensus final dividend; we look for 24 Scts final/special at full year. We are hopeful that final/special dividends to be declared at full year could beat consensus’ average of c.19 Scts. We have raised our final/special dividend expectation to 24 Scts premised on: (i) large cash inflow from Sky11; (ii) strong recovery in AdEx supported by economic growth; and (iii) historical track record of a payout of above 80% of PBIT.
Chunk of cash (S$429m) falling from the Sky. As at end 3Q10, SPH had S$663m in accounts receivables. Of this, we estimate that about S$530m were receivables from Sky@Eleven (Sky11), as the property development project was on the deferred payment scheme. Netting off 15% of sales proceeds (c.S$101m) to be collected upon transfer of legal title (expected about 1 year from TOP), we estimate that the Group will have collected/will be collecting c.S$429m in cash, equating to c.27 Scts/share or a cash yield of 6.4%.
AdEx shows strong YTD growth of 13.8%; dividend payout >80% PBIT. Operations remain firm, with Nielsen Media Research’s display & classified AdEx registering YTD growth (Sep’09-Jul’10) of 13.8%. July’s growth was 20% yoy. History has shown that dividend payout has also been above c.80% PBIT for the past 10 years, except for last year (76%). We believe this practice should continue, on the back of firm fundamentals and operations.
Buy ahead of results release (12 Oct); TP raised to S$4.52. We raised our sum-of-parts TP to S$4.52 as we factor in a higher valuation for Paragon, pegging a 10% discount to latest valuation (S$2.28bn), up from S$1.98bn previously. The possibility of a higher-than-expected final DPS (24 Scts or 5.7% yield) is attractive, leading to a full year dividend yield of 7.4% – 7 cents were paid at interim stage. We reiterate SPH as a top pick among our dividend yield plays, and a proxy riding on the economic recovery in Singapore.
TELCOs – BT
Telco stocks slip on fears of keener competition
High mobile penetration makes it unlikely for new player to bid for final 3G spectrum
TELCO stocks fell yesterday on concerns that more competitors may join the market, after the government announced that it is seeking bids for its final third-generation (3G) mobile spectrum.
But market watchers felt that the selling was unwarranted, as the high mobile penetration in Singapore makes it unlikely for a new player to bid for the spectrum.
Singapore Telecommunications (SingTel) dipped as much as 2.3 per cent yesterday before closing 0.3 per cent lower at $3.10. StarHub ended 2.8 per cent down at $2.42, while M1, the smallest of the three operators, slipped 1.8 per cent to $2.22. The benchmark Straits Times Index was marginally up at 3,036.09 points yesterday.
Despite opposition from incumbent telco operators, the Infocomm Development Authority (IDA) of Singapore said that it will go ahead with plans to auction off three lots of radio frequencies within the 1,900 to 2,100 megahertz (MHz) range.
The auction documents were published on IDA’s website last Friday. IDA said it will accept minimum bids of $20 million for each radio frequency bandwidth at an auction set for Nov 15. Bidders will not be limited to the three existing telcos.
IDA had in 2001 issued four spectrums, of which three spectrums were snapped up by SingTel, StarHub and M1 for $100 million each, leaving one unclaimed band which IDA is now seeking to allot.
Responding to the news, DMG & Partners Securities reaffirmed its ‘neutral’ call on the telco sector yesterday on expectations that competition in the industry will intensify.
‘We question the rational of a fresh auction as the additional spectrum could otherwise be more equitably distributed among the existing operators to meet the rising 3G data uptake,’ the brokerage said in a note.
But independent telecoms consultant Soh Siow Meng noted that the prospect is slim for a fourth operator to enter the market given the high mobile penetration in Singapore.
There were seven million mobile subscriptions in Singapore as at June this year, translating to a penetration rate of 140.7 per cent, IDA data shows.
‘For a new player to invest in a new network and possibly get into a price war with the three existing mobile operators, I don’t think this is a feasible business for the new player,’ Mr Soh said.
James Sullivan, head of Asia Telecom Research at JPMorgan, also noted that Singapore’s high penetration and small market size make it more likely for the incumbents to use this as an opportunity to buy additional spectrum to shore up their wireless broadband capabilities.
In the meantime, rumours that SingTel is likely to bid for the UK’s Cable & Wireless Worldwide appeared to have been quashed after SingTel clarified in a meeting with analysts that it wants to focus on the Asia-Pacific region.
Citi analysts Arthur Pineda and Ravi Sarathy said that this indicated to them that ‘there is likely to be limited interest on the part of SingTel in acquiring C&W Worldwide, contrary to UK press reports’. The speculated move was, however, perceived positively by various research houses given C&W’s attractive growth and valuations.
CIMB maintained an ‘underperform’ call on SingTel yesterday with a target price of $3.09 in view of headwinds faced by its key units. DMG’s top pick for sector exposure is M1 with a ‘buy’ call, while it is keeping ‘neutral’ on SingTel and StarHub.