Asked on 29 Apr 2020
Z74 is heavily backed by Temasek Holdings and has a steady dividend payout? But it’s current ratio, high roe and declining earnings poses some questions on the future of Z74.
Their global footprint is rather stable as well. If I remember correctly, Australia or India. Consider whether you believe in their business model? Will it continue to grow or be stable?
What is your personal opinion about 5G?
I think one of the driving forces for Singtel could be the 5G licence that it was just awarded. Given that it is the next frontier of technology, 5G brings much upside to the Singtel business with loads of potential to be captured. Taking us one step closer to Internet of Things (IOT), Singtel is well positioned to be at the forefront of these changes.
However, one worrying point for me is the questionable (?) acquisitions and investments made over the years. We have seen both Bharti Airtel and HOOQ running into issues, bringing question marks to Singtel's governance on cross borders operations.
Go through its financial statements, learn how to read balance sheets and income statements. Singtel has been a solid dividend player but it classifies as slow grower. It is currently going through structural changes and also trying to innovate to fend off Sim-Only Plans provided by newcomers. Telco industry is extremely competitive now and you need to see if Singtel will emerge stronger in the next 5-10 years. I currently have a position in Singtel as well.
Let's start off with the pros !
Largest Telco in SG with subsidaries in many other countries
Temasek Backed (Don't know if this is a valid pro but let's count it in)
Recently acquired a huge loan (Provides some financial stability)
Won 5G License in SG
And the cons !
Issues with Bharti Airtel
Slightly high payout ratio (Dividend sustainability is an issue)
Telco industry in SG is very competitive (Too many players want a piece of the cake)
I hope this little pro v con list can help you decide if you want to buy Singtel !
01 May 2020