8.78 K

Why I believe that telco stocks are 2018 best picks?
1) Before government announced their intention of introducing the 4th MNO in 2015, avg telco PE 19. Currently in 2018, M1 and Starhub PE ratio is 11 while Singtel is at 13.22. This is a cheap PE ratio to pay for defensive stocks.

2) I am aware there are concerns that MNO revenue will continue to squeeze after TPG entry at the end of the year. I foresee that MNO revenue will continue to increase from:

a. Residential fibre broadband penetration rate since Singtel/Starhub will stop rolling out copper installation for new BTO flats. The current Residential Wired Broadband Household penetration is at 94.7%.
Every 1% penetration is equivalent to 14,208 new subscribers = 6.6 million in revenue (based on $39 plan).
https://www.imda.gov.sg/industry-developme...

b. Corporate Wired Broadband penetration will continue to increase.

c. Lastly, I believe telco future is about “moving data” and due to Singapore size, it is relatively easy to implement 5G compare to other countries. Once Singapore is 5G ready, we will see more initiatives which will further increase Telco revenue.

What is the upcoming initiatives? Satellite-based ERP, Smart metering, a couple more. For now, I suspect that within 5 years, government will roll out smart metering for all households.

What is my telco/network related pick for 2018:
$M1(B2F.SI) and $SingTel(Z74.SI) is in the better position to capitalize on smart initiatives. $StarHub(CC3.SI) unfortunately will continue to see its revenue affected due to pay tv and cable broadband.

$NetLink NBN Tr(CJLU.SI) will be the backbone for all initiatives and the revenue will continue increase with residential fibre penetration.

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21 likes
29 comments
luxcan

Reply to @jasminetay : because at this moment m1 has the most wireless@sg spots (M1-2655,Singtel-811,Starhub-650). the selling of analytics and pos service is interesting.

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SSJ4

all in telcos?

luxcan

Reply to @Sporeshare : I think I still believe that m1 should be the rightfully #2 Telco but they need a strong marketing team to shake away inferior impression.

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layers

i assume he got 50% in telco

layers

Reply to @luxcan : i like your guts. thinking over adding aht. 40% liao

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learnerlim

If I buy M1 or StarHub likely my bet will be TPG collapse within 1 year after realize their mistake to enter such a saturated market .

But i welcome them in as can get better deal as a consumer .

M1 just lost another 5 bids . U going to buy more or stop ?
What will be your worst case scenario in term of dividend for M1 in the next 3 years ?

luxcan

Reply to @learnerlim : glad u ask this haha, I also think of the worst case scenario.

worst case scenario, m1 eps further to dip by 25% and management decided to keep dividend payout to 70% instead of current 80%.

then the dividend expect will be $0.075. which is 4% dividend yield as my avg is now $1.74.

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slowlybutsurely

Agreed with ur analysis on netlink trust as this industry is still quite monopolised and regulated. Hence biz moat is strong. Share price still have room for growth... For the remaining 3 telcos, it will be a tough journey ahead with the new biz environment and technological changes. Just sold off my StarHub shares too at a huge loss of 30% but I chose to do still because the biz model and growth story no longer holds as compared 5 to 10 years ago where telco stocks are strong and stable. As of now, I cannot see telcos stocks to grow within the next 3 to 5 years unless there is strong turnaround which requires a long period of time and change of biz model.

luxcan

Reply to @Jaeden : Same thinking, I don't foresee that Telco will have a strong turnover especially IMDA has set 2020 as it's target roll out year which I suspect it will take a few years before more initiatives get roll out.

I do bet on the fact that TPG will fail to make an impact on it's entry while waiting for the smart nation initiatives.

padraig_lam

my friend, you are ready for the turnaround

may you huat!


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