Relook at Singtel

I previously wrote about why I liked Singtel as a business here. Year to date, their business fundamentals hasn't changed much.

Today, Singtel registered a 15 cent drop (3.5%) in its share price to about $3.50. That's about the share price which I bought about 1.5 years ago. This gives Singtel a yield of 5%!

So what happened? 
No one knows. It could be more of the macro events (ASEAN sluggish growth, slowing China economy) rather than operationally.

Others are quick to point out on the news that My Republic managed to secure external funding for its quest to become the fourth telco in Singapore. But would that be significant to Singtel?

The fourth entrant thing is overplayed:

• Up to 3/4 of Singtel's EBITDA comes from overseas' operations
• About 8% of Singtel's EBITDA is attributable to Singapore's Mobile revenue stream

Yet, some are also sharp to point the consolidation of the smaller telco in Australia (to form the fourth largest in Australia).

• I'm not worried on that. Optus is the 2nd largest in Australia and is gaining market share with its bundling initiative and attractive new plans (MyPlan).

More likely explanation of the price correction:

• Interest rates are expected to be raise (please? Stop delaying already), yields for equities will rise in tandem thus compressing prices -> valuation correction
• General mood of the market is solemn and downbeat. We've a negative news after another -
• Grexit (now gone)
• Interest rate increase
• Then delayed due to fears of recession, with Caterpillar cutting tens of thousands of jobs and the new VW saga.
• Faltering ASEAN markets
• Sluggish China growth (with latest industrial profit dropping 8.8% YOY)
• Singapore dipping into technical recession (highly likely with July - August confirming the news and September unlikely to reverse the trend)
• Thailand exports falls for 8th month

FX movements?

Factoring adverse FX movements, Nomura has forecasted a negative 2% in EPS at most. I'm not very well-versed in FX movements (other than seeing A$ moving down) so I'll leave it to the experts. That's rather insignificant.

Singtel has also guided that FY16's capex will be slightly elevated mainly due to ramping up of infrastructure in Australia to compete with its competitor. I have no qualms about it. I'll call it planting seeds for the future.

Fundamentals intact

Despite all the negative sentiments in the market, I believe Singtel's business will not be affected by those events. As prices have came down and yield is attractive at 5% again, I've scooped up more shares to boost my dividend cash flow (towards my dividend goal).

I've seen many who decides to stay on the side line and say "more decline is on the way". Well, I'll like to take dips here and there. If a 20% dip in Singtel's share price isn't sufficient to activate your nibbling, then beware not to be left with nothing when the tide turns. Either way, I've activated my nibbling according to my plan. 

My Mantra

Stick with your plan! Stick to fundamentals!

Shifting the goal post is easy. But sticking to your plan takes determination.

What about you?