2 Companies to Watch This Week (StarHub Ltd and ComfortDelGro Corporation Ltd)
- Original Post from The Motley Fool Sg

This week, a host of companies will be giving updates on their results for the final quarter of 2018. Two companies in particular are in the spotlight:StarHub Ltd (SGX: CC3) and ComfortDelGro Corporation Ltd (SGX: C52). Here’s what investors should be looking out for when they release their results later this week.


Pay TV on the decline


StarHub Ltd is Singapore’s second largest telecommunications company. Its business can be divided into five main business segments: mobile, pay TV, broadband, enterprise fixed, and equipment sales.


In the past year, Starhub’s share price has fallen nearly 40% from its high of S$2.99 in 2018 due to disruptive competition from online streaming and a fourth telco company making its way into Singapore.


The company has suffered from lower revenue and profit from its mobile services and pay TV segments in the first nine months of 2018.


Despite a higher customer base recorded in its mobile services segment, there was an 8.3% decline in average revenue per user in the third quarter of 2018, which resulted in a 4.2% decrease in revenue from its mobile services.


Its pay TV segment has suffered due to competition from online streaming services such as Netflix. As a result, its customer base in the pay TV segment was down by 44,000, and average revenue per user decreased by $4 to S$47.


The lower average revenue per user has squeezed margins in the group, and so far this year, net profit has declined by close to 17%.



Source: StarHub Ltd 2018 Q3 Investor Presentation


In the upcoming earnings update, investors should watch for updates on the pay TV and mobile services segments. Is the company planning for strategic changes to tackle the decline, and what are its expectations for 2019? Hopefully, these answers will give investors a clearer idea of what’s in store in the future.


Bus and train services on the up


Like Starhub Ltd, ComfortDelGro is another company that has been facing disruptions to one of its core business segments. Ride-hailing apps such as Grab and Uber (when it was still in operation) have caused a decline in the ComfortDelGro taxi business. In Singapore, ComfortDelGro has been forced to decrease the size of its fleet, which has resulted in lower revenue contributions from the taxi business.


That said, ComfortDelGro also has other important business contributors, such as its public transports services business, which contributed 71% of the company’s revenue in the third quarter of 2018. Revenue from this segment grew by 15.1% in that quarter.In addition, ComfortDelGro has looked to expand its business overseas through the acquisition of bus lines in Australia and Wales.


In its last reporting quarter, the land transport giant said that it expects growth in its public transport services in Singapore and Australia due to the new bus lines. Its other segments are expected to be stable.


Meanwhile, there are 28 surprising and important things we think every Singaporean investor should know—and we’ve laid them all out in The Motley Fool Singapore’s new e-book. Packed with information and insights, we believe this book will help you be a better, smarter investor. You can download the full e-book FREE of charge—simply click here now to claim your copy.


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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Jeremy Chia doesn't own shares in any companies mentioned.


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Better Buy: Singtel vs. StarHub
- Original Post from The Motley Fool Sg

With M1 Ltd already privatised, Singapore Telecommunications Limited (SGX: Z74), or Singtel for short, and StarHub Ltd (SGX: CC3) are the two remaining telco companies listed in Singapore. For investors interested in the telco space, which of the two outfits would be the better buy? Let’s check it out.


Scanning the businesses


Singtel is the largest telco in Singapore with a 49% mobile market share, which works out to 4.1 million customers (as of 31 March 2018). On top of doing business in Singapore, it operates in Australia, India, Indonesia, the Philippines, and Thailand. Overall, Singtel boasts over 650 million mobile customers in 21 countries (as of 31 March 2018).


StarHub, on the other hand, operates solely in Singapore and is our country’s second-largest telecommunications company.


Business growth


We will start the comparison with the income statement. This statement, also known as profit and loss statement, shows us how much revenue Singtel and StarHub brought in from the sale of their goods and services, and how much is left after paying all the various overheads needed to run the businesses. The leftover portion is known as net profit or earnings.


Singtel has a fiscal year (FY) that ends on 31 March each year while StarHub’s ends on 31 December every year. The following compares the revenue and net profit growth of the two companies over the last five fiscal years:




















Singtel StarHub
Revenue growth 0.61% 0.02%
Net profit growth -3.26% -11.46%

Source: Company annual reports; author’s compilation


Singtel’s revenue has grown from S$16.85 billion in FY2014 to S$17.37 billion in FY2019, translating to a growth of 0.6% per annum. In comparison, StarHub’s top-line growth was flat from FY2013 to FY2018.


As for the earnings, both Singtel and StarHub saw their bottom-lines fall over the past five years. However, Singtel performed better than its counterpart in terms of a much smaller percentage decline.


Winner: Singtel


Financial strength


Although revenues and profits are important, they do not tell investors the whole story. For instance, the income statement does not show if a company can survive a prolonged economic crisis. That is where the balance sheet comes into play. It can reveal the health of a company by providing a snapshot of its financial condition.


As of 31 March 2019, Singtel and StarHub’s balance sheet revealed the following:

























Singtel StarHub

Cash and cash equivalents

(S$’ million)


512.7 171.5

Total debt

(S$’ million)


10,664.1 1,028.3
Net-debt-to-equity ratio 34.0% 147.5%

Source: Company earnings reports; author’s compilation


Of the two, Singtel appears to be more conservatively leveraged with a lower net-debt-to-equity ratio of 34%, compared to StarHub’s ratio of above 100%.


Winner: Singtel


Cash is king


Although the income statement shows the amount of profit a company makes every year, this profit does not necessarily translate into the actual cash that flows into a company. To get an accurate picture of the flow of money in and out of a company, we have to look at the statement of cash flows.


In particular, we will zoom into the free cash flow of Singtel and StarHub. Free cash flow (FCF) is cash that the telcos can use to dish out dividends to shareholders, buy back their shares, make acquisitions, strengthen their balance sheet, or reinvest back into their businesses. The following compares the FCF growth of Singtel and StarHub over the last five fiscal years:















Singtel StarHub
FCF growth 2.4% -13.0%

Source: Company annual reports; author’s compilation


It can be seen that Singtel is better at producing FCF with an annualised growth of 2.4% from FY2014 to FY2019. The metric grew from S$3.25 billion to S$3.65 billion during the same time frame. In comparison, StarHub’s FCF fell from S$291.9 million in FY2013 to S$145.5 million in FY2018.


Winner: Singtel


Dividend growth


Telcos are perceived to be great income shares due to the defensive nature of their businesses. Here, let’s compare the dividend growth at Singtel and StarHub over the past five fiscal years.















Singtel StarHub
Dividend per share growth 0.8% -4.4%

Source: Company annual reports; author’s compilation


Singtel has increased its dividend per share from 16.8 Singapore cents in FY2014 to 17.5 Singapore cents in FY2019. On the other hand, StarHub’s dividend per share tumbled 4.4% per annum, from 20.0 Singapore cents in FY2013 to 16.0 Singapore cents in FY2018.


Winner: Singtel


Valuations


As investors, we should focus on the value of businesses and not on the daily changes in the share prices. Let’s now compare the price-to-earnings (PE) ratio and dividend yield of the two telcos. The values below are as of the closing prices on 11 June 2019.






























Singtel StarHub
PE ratio 17.4 13.8
Dividend yield 5.3% 9.7%
Share price S$3.29 S$1.47
Market capitalisation S$53.72 billion S$2.55 billion

Source: SGX StockFacts


StarHub has a lower PE ratio and higher dividend yield than Singtel. Income investors should keep in mind that the dividend payout of the two telcos in the coming years could change significantly though.


In its FY2018 annual report, Singtel mentioned that it “expects to maintain its ordinary dividends at 17.5 cents per share for the next two financial years and thereafter revert to the payout ratio of between 60% to 75% of its underlying net profit”.


As for StarHub, from FY2019, it intends to pay out at least 80% of net profit (adjusted for one-off items) as dividends. For the current financial year (FY2019), StarHub plans to pay a total dividend of at least 9.0 Singapore cents per share, divided into 2.25 cents each quarter. Any payment above 9.0 cents corresponding to the new dividend policy would be dished out in the fourth quarter. If adjusted for the 9.0 cents dividend, StarHub’s dividend yield falls to 6.1%.


Winner: StarHub


Connecting the data


Overall, Singtel is the clear winner since it has superior revenue, net profit, and free cash flow growth when compared to StarHub. Singtel’s balance sheet and dividend growth are also stronger than its counterpart. I also like Singtel better than StarHub due to its varied geographical reach, which diversifies its business and allows it to ride on rising consumerism in Asia.


There are 28 surprising and important things we think every Singaporean investor should know—and we’ve laid them all out in The Motley Fool Singapore’s new e-book. Packed with information and insights, we believe this book will help you be a better, smarter investor. You can download the full e-book FREE of charge—simply click here now to claim your copy.


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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.


$SingTel(Z74.SI) $StarHub(CC3.SI)

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Better Buy: Singtel vs. StarHub
- Original Post from The Motley Fool Sg

With M1 Ltd already privatised, Singapore Telecommunications Limited (SGX: Z74), or Singtel for short, and StarHub Ltd (SGX: CC3) are the two remaining telco companies listed in Singapore. For investors interested in the telco space, which of the two outfits would be the better buy? Let’s check it out.


Scanning the businesses


Singtel is the largest telco in Singapore with a 49% mobile market share, which works out to 4.1 million customers (as of 31 March 2018). On top of doing business in Singapore, it operates in Australia, India, Indonesia, the Philippines, and Thailand. Overall, Singtel boasts over 650 million mobile customers in 21 countries (as of 31 March 2018).


StarHub, on the other hand, operates solely in Singapore and is our country’s second-largest telecommunications company.


Business growth


We will start the comparison with the income statement. This statement, also known as profit and loss statement, shows us how much revenue Singtel and StarHub brought in from the sale of their goods and services, and how much is left after paying all the various overheads needed to run the businesses. The leftover portion is known as net profit or earnings.


Singtel has a fiscal year (FY) that ends on 31 March each year while StarHub’s ends on 31 December every year. The following compares the revenue and net profit growth of the two companies over the last six fiscal years:




















Singtel StarHub
Revenue growth 0.61% 0.02%
Net profit growth -3.26% -11.46%

Source: Company annual reports; author’s compilation


Singtel’s revenue has grown from S$16.85 billion in FY2014 to S$17.37 billion in FY2019, translating to a growth of 0.6% per annum. In comparison, StarHub’s top-line growth was flat from FY2013 to FY2018.


As for the earnings, both Singtel and StarHub saw their bottom-lines fall over the past six fiscal years. However, Singtel performed better than its counterpart in terms of a much smaller percentage decline.


Winner: Singtel


Financial strength


Although revenues and profits are important, they do not tell investors the whole story. For instance, the income statement does not show if a company can survive a prolonged economic crisis. That is where the balance sheet comes into play. It can reveal the health of a company by providing a snapshot of its financial condition.


As of 31 March 2019, Singtel and StarHub’s balance sheet revealed the following:

























Singtel StarHub

Cash and cash equivalents

(S$’ million)


512.7 171.5

Total debt

(S$’ million)


10,664.1 1,028.3
Net-debt-to-equity ratio 34.0% 147.5%

Source: Company earnings reports; author’s compilation


Of the two, Singtel appears to be more conservatively leveraged with a lower net-debt-to-equity ratio of 34%, compared to StarHub’s ratio of above 100%.


Winner: Singtel


Cash is king


Although the income statement shows the amount of profit a company makes every year, this profit does not necessarily translate into the actual cash that flows into a company. To get an accurate picture of the flow of money in and out of a company, we have to look at the statement of cash flows.


In particular, we will zoom into the free cash flow of Singtel and StarHub. Free cash flow (FCF) is cash that the telcos can use to dish out dividends to shareholders, buy back their shares, make acquisitions, strengthen their balance sheet, or reinvest back into their businesses. The following compares the FCF growth of Singtel and StarHub over the last six fiscal years:















Singtel StarHub
FCF growth 2.4% -13.0%

Source: Company annual reports; author’s compilation


It can be seen that Singtel is better at producing FCF with an annualised growth of 2.4% from FY2014 to FY2019. The metric grew from S$3.25 billion to S$3.65 billion during the same time frame. In comparison, StarHub’s FCF fell from S$291.9 million in FY2013 to S$145.5 million in FY2018.


Winner: Singtel


Dividend growth


Telcos are perceived to be great income shares due to the defensive nature of their businesses. Here, let’s compare the dividend growth at Singtel and StarHub over the past six fiscal years.















Singtel StarHub
Dividend per share growth 0.8% -4.4%

Source: Company annual reports; author’s compilation


Singtel has increased its dividend per share from 16.8 Singapore cents in FY2014 to 17.5 Singapore cents in FY2019. On the other hand, StarHub’s dividend per share tumbled 4.4% per annum, from 20.0 Singapore cents in FY2013 to 16.0 Singapore cents in FY2018.


Winner: Singtel


Valuations


As investors, we should focus on the value of businesses and not on the daily changes in the share prices. Let’s now compare the price-to-earnings (PE) ratio and dividend yield of the two telcos. The values below are as of the closing prices on 11 June 2019.






























Singtel StarHub
PE ratio 17.4 13.8
Dividend yield 5.3% 9.7%
Share price S$3.29 S$1.47
Market capitalisation S$53.72 billion S$2.55 billion

Source: SGX StockFacts


StarHub has a lower PE ratio and higher dividend yield than Singtel. Income investors should keep in mind that the dividend payout of the two telcos in the coming years could change significantly though.


In its FY2018 annual report, Singtel mentioned that it “expects to maintain its ordinary dividends at 17.5 cents per share for the next two financial years and thereafter revert to the payout ratio of between 60% to 75% of its underlying net profit”.


As for StarHub, from FY2019, it intends to pay out at least 80% of net profit (adjusted for one-off items) as dividends. For the current financial year (FY2019), StarHub plans to pay a total dividend of at least 9.0 Singapore cents per share, divided into 2.25 cents each quarter. Any payment above 9.0 cents corresponding to the new dividend policy would be dished out in the fourth quarter. If adjusted for the 9.0 cents dividend, StarHub’s dividend yield falls to 6.1%.


Winner: StarHub


Connecting the data


Overall, Singtel is the clear winner since it has superior revenue, net profit, and free cash flow growth when compared to StarHub. Singtel’s balance sheet and dividend growth are also stronger than its counterpart. I also like Singtel better than StarHub due to its varied geographical reach, which diversifies its business and allows it to ride on rising consumerism in Asia.


There are 28 surprising and important things we think every Singaporean investor should know—and we’ve laid them all out in The Motley Fool Singapore’s new e-book. Packed with information and insights, we believe this book will help you be a better, smarter investor. You can download the full e-book FREE of charge—simply click here now to claim your copy.


More reading



The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.


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Are Ride-Hailing Companies Still a Threat to ComfortDelGro?
- Original Post from The Motley Fool Sg

ComfortDelGro Corporation Ltd (SGX: C52), or Comfort for short, is a land transportation behemoth with business interests in bus, rail, and taxis. Aside from Singapore, the group has a presence in six other countries – China, the UK, Australia, Malaysia, Ireland and Vietnam.


Investors can recall the troubles associated with Comfort’s taxi fleet when Uber Technologies Inc (NYSE: UBER) started to operate and expand its fleet aggressively in Singapore back in 2013. In that same year, Grab Singapore (a home-grown ride hailing company) also started its operations and expanded aggressively with the assistance from venture capitalists.


The price wars got so bad from 2013 through to 2018 that Comfort’s taxi fleet shrank to its lowest level in a decade, to just 13,244 (down 22% from its December 2015 fleet size). In March 2018, Uber was sent packing from Singapore when Grab acquired its Southeast Asian operations, just months after Comfort had signed a strategic collaboration deal with Uber.


So the key issue is one many Singaporean companies will have to grapple with – potential disruption. More specifically for Comfort though, are ride-hailing companies such as Grab and Gojek (a new Indonesian ride-hailing company which entered Singapore in late-2018) still a major threat to it?


Comfort adding 200 taxis to its fleet


Comfort announced recently that it was adding 200 new taxis to its fleet, in what was the first addition to the fleet in 18 months. According to the group, this was due to more people switching from driving private hire cars to driving taxis instead, as driving taxis was more “stable”. The last time Comfort placed an order for taxis was in December 2016.


Dynamic fare implementation


Barely two weeks ago, Comfort declared its intention to implement dynamic pricing, along with a plan to open up its booking app to Grab and Gojek drivers. Though reasons remain unclear at this point, this move may be an attempt to stem the exodus of taxi drivers into the private hire market. The problem is that this move may backfire as it will start to blur the lines between taxis and private hire cars, with commuters lumping them together as one and the same.


Grab and Gojek attempt to become “super-apps”


Grab and Gojek are also not sitting still, with both companies adding to their respective fleets too. However, these companies also have a larger purpose in mind, which is to become a “super-app” for users to access all kinds of services, similar to the concept of an “app within an app” developed by Chinese companies such as Tencent Holdings Ltd (HKSE: 700). This goal makes them spread their resources out to different functions rather than simply ride-hailing alone and could provide some respite to Comfort.


Stabilising ride


The above evidence points to a stabilising situation for Comfort, as they are beginning to order new taxis again, possibly signalling increased demand for taxis in the near future. However, the planned implementation of dynamic pricing could work against Comfort if it cannot differentiate itself from the ride-hailing companies. This is something investors need to watch closely for developments.


In addition, Grab and Gojek are no pushovers either as both companies, though unprofitable, have massive funding backing them. So even if it looks as though the battle may be over for now, another war could be about to commence.


There are 28 surprising and important things we think every Singaporean investor should know—and we’ve laid them all out in The Motley Fool Singapore’s new e-book. Packed with information and insights, we believe this book will help you be a better, smarter investor. You can download the full e-book FREE of charge—simply click here now to claim your copy.


More reading



The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned. The Motley Fool Singapore has recommended shares of Tencent Holdings Ltd.


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ComfortDelGro’s Latest Earnings: Strong Start to the Year
- Original Post from The Motley Fool Sg

ComfortDelGro Corporation Ltd (SGX: C52) is a Singapore-based land transportation conglomerate with business interests in the bus, taxi and rail services. Apart from Singapore, it has a presence in six other countries, namely, China, the UK, Australia, Malaysia, Ireland, and Vietnam.


ComfortDelGro announced its financial results for the first quarter ending 31 March 2019, yesterday. Let’s have a quick look to see how it did.


Financial highlights


Here are some of the key financial highlights from the latest full-year results:


1) Revenue grew 7.8% year-on-year to S$947.3 million. The increase in revenue was on the back of strong contributions from new acquisitions which accounted for close to 80% of the increase in revenue.


2) Total operating costs followed suit increased by 7.3% to S$839.9 million. The increase in operating cost was due to staff costs associated with the new acquisitions.


3) As a result, operating profit rose by 12.2% to S$107.4 million.


4) Profit attributable to shareholders saw a 6.2% rise, from S$66.3 million to S$70.4 million.


5) Consequently, earnings per share moved from 3.06 cents to 3.25 cents, up 6.2%.


6) As of 31 December 2018, ComfortDelGro’s balance sheet had S$586.1 million in cash and bank balances, and S$569.9 million in total debt. This translates to a net cash position of S$16.2 million. This is lower year-on-year when compared to 2017 when ComfortDelGro reported a net cash position of S$273.9 million.


7) Operating cash flow, improved by 49.1%, from S$64.1 million a year ago to S$95.6 million. Capital expenditure, on the other hand, increased from S$37.7 million to S$95.2 million. This resulted in ComfortDelGro’s free cash flow dropping sharply by 98.5%, from S$26.4 million S$0.4 million.


Outlook


ComfortDelGro Managing Director/Group CEO, Mr. Yang Ban Seng, commented,


“The robust first quarter’s results show growth from the new acquisitions as well as existing businesses. The acquisitions we made in the last year have started to reap returns and we expect that they will continue to do so. We will continue to grow our core businesses, look at investment opportunities and explore new areas for growth, particularly in those that leverage technology and strengthen our core expertise.”


ComfortDelGro’s share price ended trading on Tuesday at S$2.57, resulting in a price-to-earnings ratio of 18.4 and a dividend yield of 4.1%.


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Motley Fool writer Esjay contributed to this article. Esjay does not own shares in Comfortdelgro.


The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Tim Phillips doesn’t own shares in any companies mentioned.


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Starhub Ltd’s Q1 2019 Earnings Update: Revenue Grew but Profit Fell
- Original Post from The Motley Fool Sg

Last Friday, StarHub Ltd(SGX: CC3) released its 2019 first-quarter earnings update. As a quick introduction, StarHub is one of the three companies in the telecommunication industry.


Here, let’s look at 10 important things from the earnings update.



  1. Revenue for the quarter was up 6% year-on-year to S$597 million. Yet, service revenue declined 1% year-on-year to S$444 million.

  2. Operating profit was down 14% year-on-year to S$72 million.

  3. Quarterly earnings before interest tax depreciation and amortisation (EBITDA) improved 5% year-on-year to S$162 million.

  4. Service segment’s EBITDA margin for the quarter improved from 31.7% last year to 33.7% this quarter.

  5. Profit attributable to investors fell by 14% year-on-year to S$54.0 million.

  6. Free cash flow grew from S$10 million a year ago to S$21 million this quarter.

  7. As of 31 March 2019, net debt stood at S$857 million and the debt-to-EBITDA ratio was 1.49. Net debt and debt-to-EBITDA ratio were S$862 million and 1.52, respectively, as of 31 December 2018.

  8. For the quarter, revenue from sales of equipment and Enterprise business were up by 33% and 14%, respectively, as compared to the same period last year. On the other hand, revenue for Mobile and Pay TV were down by 5% and 12%, respectively, as compared to last year.

  9. Starhub declared a dividend per share of 2.25 cents in the quarter.

  10. The telco also gave the following outlook guidance for 2019:


“Based on the current outlook, we expect the Group’s 2019 service revenue to be stable to a decline of 2% YoY. Group service EBITDA margin is expected to be between 30% to 32% (after SFRS(I) 16 adoption).


In 2019, CAPEX commitment, excluding spectrum payment of S$282.0 million, is expected to be between 11% to 12% of total revenue. The Group intends to pay-out at least 80% of net profit attributable to shareholders (adjusted for one off, non-recurring items), as dividend. For FY2019, the Group intends to pay a dividend of at least 9 cents per ordinary share, at a rate of 2.25 cents per quarter. Any payment above 9 cents would occur in the last quarterly payment.”


Click here nowfor yourFREEsubscription toTake StockSingapore, The Motley Fool’s free investing newsletter. Written byDavid Kuo,Take Stock Singaporetells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.


TheMotley Fool’s purpose is to help the world invest, better.Like us on Facebook to keep up-to-date with our latest news and articles.


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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.


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