SINGTEL: BULL MARKET AHEAD?

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Technicals

Looking at the Weekly chart we can see a falling wedge formed.

Regardless of the type (reversal or continuation), falling wedges are regarded as bullish patterns.

Looking at the candle sticks we can also see that a three white soldiers pattern have formed.The three white soldiers pattern is a bullish reversal pattern formed by three consecutive candles, which are green (or white) in color. This pattern forms at the bottom of a downtrend and all three candles are long and bullish.

Tips for trading three white soldier

The three white soldiers pattern requires three data points across a timeframe to signal momentum and a high chance that the market will shift in an uptrend from a downtrend or rangebound if that was the price action behavior prior to this pattern.

There are several ways you can trade the pattern when you come across it. The first step you should do is confirm the signal using technical indicators such as the relative strength index (RSI) or the stochastic oscillator.

This can help to validate what the candles are signaling since indicators can provide more insight into price action.

For instance, if the three white soldiers patterns appears at the bottom of a downtrend and you think a reversal is coming, you can use the RSI to test the signal.

This indicator can help you to forecast price moves because it tracks the momentum and speed of the market. If a reversal is confirmed, you may want to open a long buy position.

The best place to enter your buy position is on any of the three soldiers. But it is best if you enter into trading position on the first soldier.

Three white soldiers pattern is a strong confirmation for any other bullish signals that the market has shifted to a bullish uptrend. The odds of this pattern working increases if the strong moves happen off oversold support.

However, the danger of it not working increases if the moves take a chart into an overbought reading.

Fundamentals

Singapore Telecommunications (Z74.SI), or SingTel for short, have been discussed heavily by investors recently. The telco giant, alongside with StarHub and M1, collectively known as the Big 3, control almost the entire market, forming an oligopoly market structure, with SingTel controlling a remarkably 53.7% of the market share in 2018. Other than being the largest telecom operator in Singapore, Singtel also owns Australian subsidiary, Optus, which is the second-largest operator in Australia. Singtel also has substantial stakes in telcos in the region – Telkomsel in Indonesia, Bharti Airtel (Bharti) in India, AIS in Thailand as well as Globe in the Philippines.

Over the last couple of years, the share price of SingTel has dropped significantly, from $4.57 from year 2015 to only about $2.00 last month. Is it the time to buy low sell high now or will it get continue to get cheaper or even worst, a delisting from the SGX? Today, we will be taking a deep dive into Singapore's largest telco operator.

Breaking down SingTel's 1HFY21, operating revenue suffered a double digit decline of 10% while EBIT plunged 44%. The reason for the drop in profits is mostly attributed to its Australian subsidiary Optus, which saw its EBITDA dropped by 30% to A$977 million due to low fixed-line margins and decline in NBN migration fee.

Currently, SingTel has a 12-month consensus share price target of S$3.06, alongside an average rating of ‘buy’ – based on a Bloomberg poll of 17 brokers, representing an potential upside of roughly 22% from the last traded price. According to a report by RHB bank, analysts cut their FY2021 to FY2023 full-year core earnings by 12% to 14%, they nevertheless predict that there will be ‘some earnings respite’ in the second quarter of 2021 with ‘mobility restrictions progressively easing’ in the backdrop of the COVID-19 pandemic.

Now, the million dollar question is, is it worth buying now? Before we move on to the answer, it is important to look at its future potential outlook.

1. Digital bank license

Singtel and Grab is entering a joint venture for a full digital banking license. The Monetary Authority of Singapore (MAS) announced last year June that it would grant up to five digital bank (DB) licences in the little red dot. Under this joint venture, Singtel will own 40% while ride-hailing and payments platform Grab owns the remaining 60% of the new entity. If it can secure a license, the new bank has the potential to win a 2-4% market share in Singapore's quickly growing banking sector. The Singtel-Grab joint venture would unite two companies with large regional user bases, both headquartered in the island city-state with SingTel having 4.3 million mobile plan subscribers while Grab having 187 million users.

1. Newer firms entering the market

With only a slightly lesser than 6 million population in Singapore, the telecommunications is becoming increasingly saturated with more players entering the market. New firms includes MyRepublic, Circles.Life and also TPG, just to mention a few. New players are quickly grabbing the market share by using penetration pricing - a marketing strategy used by businesses to attract customers to a new product or service by offering a lower price during its initial offering. This is especially popular among youths and young adults, where the pick-up rate for new telco provider is very high as consumers flock to a more affordable provider in an industry where demand is elastic. SingTel will have to focus on developing brand loyalty and retaining its current customer base.

TPG $10 monthly SIM-only plan

1. Introduction and rolling out of 5G network and infrastructure

According to Cisco's annual Digital Readiness Index, Singapore has been named the world’s top nation in terms of digital adoption and which showcases the most favourable environment for digitalisation. According to a report by the Infocomm Media Development Authority (IMDA) on 24 June 2020, Singtel was issued the Final Awards to deploy nationwide 5G standalone networks that deliver full-fledged 5G capabilities. This represents major upside for Singtel as telcos could monetise these applications first before spending more money to roll out the full-fledged 5G networks, said Mr Ramakrishna Maruvada, a regional telecoms analyst at Daiwa Capital Markets. 5G network is set to power the growth of virtual reality and augmented reality gaming experience, as well as Internet of Things (IoT) applications in the coming years and SingTel is well poised to capitalise on that opportunity.

Conclusion : Based on the fundamental and technical analysis we are bullish on Singtel in the long term. And that there is a possibility for the end of a downtrend and a reversal might be ahead in the next few weeks.