Divested on StarHub as their Management skills are not as strong as before.

Divested

I've divested StarHub before their 3Q16 results announcement after considering various points and thought it'll be a good time to do so before their announcement.

Weak outlook on Mobile

Mobile segment outlook is very weak, and especially so for StarHub and M1. This is affirmed by their 3Q announcement vis a vis Singtel's announcement.

Pricing pressure from the impending 4th Telco arrival has took a toll on M1 and StarHub.

Defensive Mode

StarHub's management has been on a defensive mode with regards to their earnings call.

They attributed their fall in Mobile earnings to 

1. IDD and International Roaming calls (as usual) 
2. Not pricing pressure from their data upsize point of view. 

An analyst even questioned on their need for such aggressive move on the data front, given that the fall in voice revenue is larger than the data upside.

Management's response was that their move was not aggressive. They even attempted to assured investors by saying that what they're seeing is that consumers are not downgrading their plans but instead, increasing their subscription to the Plus 3 option due to increase in data consumption.

Now, these are all nice to hear. But it's essentially useless if their revenue does not show otherwise.

Singtel, meanwhile, has managed to stabilised their Mobile revenue despite falling voice revenue with strong data growth. They've put their money where their mouth is.

Weak PayTV vs Singtel

StarHub's and Singtel's PayTV subscribers are lowering quarter on quarter. However, the similarity stops here.

Singtel has managed to increase their revenue while StarHub's PayTV revenue is falling together with its smaller subscribers' base.

In response to analysts' question, StarHub is again on the defensive mode saying

1. Working hard on content
2. StarHub Go is there
3. Netflix and other illegal options are there all along

Again, these are nice to hear until your revenue shows otherwise.

Meanwhile, Singtel has somehow managed to increase their PayTV revenue even when excluding BPL subscriptions. 

Also, I remember them saying this on their previous earning calls in response to analysts

1. Cutting the cord in other countries will not be seen on the same scale here
2. StarHub has local contents that prevents consumers from cutting cords (as the OTT options do not have significant asian content)
3. Netflix via VPN is already available long before, together with illegal setup box, and StarHub has been unfazed.
4. StarHub Go will address the OTT options

Yet now, look at their PayTV segment. They must be eating their words.

Meanwhile, Singtel:

1. Partnered with Netflix
2. Has VIU, CAST to countered the OTT options
3. BPL is really helping their revenue (although their profitability on BPL remains questionable).

Hubbing (their Trump Card) is weakening as well

Even their Hubbing households (which Management has been trumpeting forever, is falling for the second or third quarter).

No competitive advantage left

In summary, why i decided to divest before their 3Q announcement

1. Unable to stem the falling of their PayTV business (unlike Singtel)
2. Unable to manage their Mobile revenue fall (unlike Singtel)
3. Enterprise growth seemed to have stalled
4. Price points are not the cheapest (vs M1), yet not the most expensive (for investor's benefit).

When you're neither here nor there, and have no clear competitive advantage, I'm not comfortable being your long-term shareholder as I've no confidence in your management skills. 

For now, I'm still closely monitoring M1, and will divest if need be. At least now, they're the "cheapest" in the market.

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?

Which stock are you picking for this buffet? - Singtel

In my previous post, I talked about my "watch list" for this mini buffet STI is experiencing. Here, I'll discuss if Singtel is a good enough stock to accumulate.



Full fledged Telco
Like StarHub, Singtel has the full range of telco services: Mobile, Fixed lines (Broadband), TV. This aids in Singtel's stickiness with its customer in Singapore as the company can bundle their products and lower the churn rate.

Diversification of revenue stream
Business Segments
Consumers, Enterprise (Corporate Business), Digital Life (Advertising) taking 61%, 37% and 3% of revenue respectively. Enterprise segment sees Singtel enjoying inelastic prices with its large enterprises and thus resilient to "new players".

Geographic
EBITDA and share of Associates split - Consumer Segment
Singapore, 100% owned (13%)
Australia, 100% owned (45%)
Associates (42%)
- Indonesia,Africa (16%)
- India (12%)
- Thailand (8%)
- Philippines (6%)

The recent 4th telco scare in Singapore, if materialise, would have little impact to Singtel's bottom-line.

However, the wide diversification of Singtel's revenue makes the company vulnerable to currency volatility.

Market Leader
Similar to SATS, Singtel is a leader in its investments.

Singapore (Singtel) - 1st in market share
Australia (Optus) - 2nd in market share
Indonesia (Telkomsel) - 1st in markset share
India (Airtel) - 1st in market share
Thailand (AIS) - 1st in market share
Philippines (Globe) - 2nd in market share

Historically, being a telco market leader also meant that its market share is unlikely to change significantly (even with the introduction of new players) due to its inherent brand awareness and attractiveness.

I also like that fact that all of its associates have businesses in emerging markets; where the penetration rate is still low and there is a huge room for improvement.

Entrance of 4th Telco in Singapore
Quality growth
I believe Singtel would take on the path of Verizon and AT&T in the U.S when T-Mobile was introduced as a new player.

T-mobile was agressive in gaining market share and cutting ARPU across the US. Both incumbents, however, chose the route of modest growth with maintain ARPU and quality EBITDA. Similarly, T-Mobile, although revenue was exploding with growth, had its profitability struggling due to its pricing strategy.

The "older generation" effect

Like DBS/POSB, Singtel has the blessing of the "older generation", where our fathers and mothers tend to stick with Singtel. 

Aiyah, why change leh. I use Singtel so many years already, don't change la. Everything is ok mah.

So how?

What do you think? Is Singtel is good enough buy, especially in the current minor sell down?

I know I'll be accumulating if it reaches my target price. What about you?

Singtel - Chugging along, strong and steady

Singtel is a telecommunications company with regional business. They've announced their full year results ending 31 March 2015 today and its looking great.

Revenue up 5%

Net Profit up 5%

Ordinary dividend up 1 cent to 17.5 cent

Overall, Singtel's FY15 results is encouraging and steady. What I like most is that its results has been consistently improving year on year (excluding currency fluctuations). Most importantly, core dividends have been steadily increasing too.

I love these kind of businesses: boring, plain, no surprise.

Only then will I have a peace of mind. 

Also, what's encouraging is that 61% of their postpaid customers are on tiered plans, with 26% of those exceeding their data caps. This shows that there's room for growth in data monetisation.

Being a regional telco, we can either say that they've diversification or that they have multiple risks of vulnerability. Either way, as long as Singtel is performing well, I'm happy! :)

What's more, Singtel is the market leader in Singapore, and the second biggest telco in Australia. Like Warren Buffett, I believe in choosing the best of a particular industry.

Singtel closed at $4.36 today, giving a dividend yield of 4%. I'll be happy to accumulate more if prices are attractive once more.