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?

A breather for Vicom?

Demand for old cars for rental slows scrappage

The number of cars taken off the road has slowed, contrary to expectations, as taxi app operators like Uber and GrabTaxi snap up older vehicles to grow their rental fleets.

More than a third of Singapore's car population is between eight and 10 years old, but the recent phenomenon may be putting the brakes on the scrap rate.

Taxi app firms Uber and GrabTaxi are snapping up older cars and renting them out as "limousines" which ply like "on-call cabs". So while a 91/2-year-old car may previously have gone to the scrapyard, it remains on the road for another six months.

Because the rental rate of such old vehicles is low, they are proving to be popular with former cabbies as well as people who are willing to be part-time drivers in order to have access to a car.



Respite
This small but much needed news may be the catalyst that Vicom is yearning for in a bid to counter the tsunami of cars heading for de-registration. This trend may soften the tough landing for Vicom's maintenance unit and hopefully smoothen the entire imbalance age of the COE issued in Singapore.

Vicom closed $6 on Wednesday, giving a yield of 4.38%. I'm still having the likings for this company due to the high barrier of entry and safe nature of its business.

Besides, they've the chance to raise their fees after keeping the same rates for about a decade. 

I wrote an article about Vicom and how I think it's a good buy. The factors are still intact. Slow and steady eh?

Let's Get Rich's Report Card - August 2015

	Name	Portfolio %	Average price ($)	Div Yield on cost
1	M1	15.56%	3.63	5.20%
2	Singtel	10.82%	3.78	4.62%
3	Raffles Medical	9.45%	4.13	1.09%
4	SATS	8.88%	3.11	4.50%
5	Parkway Life	6.69%	2.34	4.83%
6	Sembcorp Industries	6.51%	4.56	3.51%
7	Colex	6.05%	0.321	1.56%
8	StarHub	5.78%	4.05	4.94%
9	Design Studio	5.64%	0.54	12.01%
10	CapitaMall Trust	5.55%	1.95	5.59%
11	Vicom	4.31%	6.04	4.35%
12	Sheng Siong	3.69%	0.68	4.48%
	UOB	3.29%	23.05	3.90%
13	DBS	2.54%	23.06	3.38%
14	Old Chang Kee	2.48%	0.87	1.73%
15	SIIC Environment	1.43%	0.20	0%
16	Thai Beverage	1.32%	0.46	3.69%

Expected Annual Dividends: $3,054 ($254/month)

Dividend Yield: 4.36%

Expected annual dividends and yield dipped slightly as I've divested a partially on SATS.

Why?

I've realised the gains on SATS (at about 20%+) by selling a partial stake of SATS, which used to be my largest holding. I'm glad to be able to sell at a higher price before it finally decline with the general market.

Although I'm a huge advocate of holding stocks for long term, this move was made in order for me to free up some cash for my new purchases. I believed that the market was going to fall further given the fundamental weakness in the world now.

How long will the stock market remained low? I've no idea. But I have a hunch that this will not be a short instance. China's PMI is slowing down and it affects a lot of the world's economy.

New purchases

Colex. I finally bought some Colex, this is despite Colex registering a strong half-year result and the price barely nudged upwards. Instead, it fell lower and I felt that it was a great opportunity to scoop some Colex.

DBS. I've bought DBS because I felt the price was fair. I was deciding between UOB, OCBC and DBS (all so yummy!!!) but I went for DBS instead. If only I had a bigger war chest ready for this buffet session.

Pace yourself and stick to the plan

I'm still pacing myself in purchasing stocks. CMT, PLIFE, 3 banks, Singtel are all on my watch list and many have already hit very attractive prices. However, I'm taking my pick and pacing myself in case there's further decline in the stock market.