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Singtel share price in turmoil

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In 2013, Singtel was trumped by Telenor and Ooredoo in its telco licensing bid in Myanmar, one of the world’s last untapped mobile market. The doomed attempt illustrated the perennial challenge that Singtel faces in its overseas expansion against the backdrop of growing competition in the Southeast Asia region. Nevertheless, not many would agree with the management expansion plan as Singtel share price stuttered following Moody’s revision of Singtel outlook to “negative”.

Although Moody’s lowered Singtel’s outlook, it affirmed Singtel senior unsecured ratings of A1. Moody’s has also affirmed the (P)A1 rating on the Euro Medium Term Notes programme as well as the A1 rating on all notes issued by Singtel Group Treasury. Despite so, Singtel share price wobbled slightly, dropping from $3.00 on 5 March 2019 to the current $2.95.

Singtel share price

While Moody’s assessment of Singtel is clearly damning, Singtel shot itself in the foot by delivering a set of Q3FY2019 results that fell short of many analyst estimates. Most business units reported declining profits on year-on-year basis. To make matters worse, the latest results marked the fifth consecutive quarter of declining profits. As a result, the management took a rare step to issue a statement that “Singtel remains financially disciplined and committed to maintaining our investment-grade credit ratings”, presumably to defend Singtel share price.

It certainly seems like a perfect storm for Singtel share price but should investors panic and run for their lives? In this article, I will share my insights on Singtel share price.

Singtel share price ready to roil?

If investors look back, Singtel share price started the year in bad shape as the counter sunk into multi-years low of $2.86. Yet only in April 2015, Singtel share price was trading at $4.40. A combination of factors, such as entry of MVNOs, TPG Telecom and technology disruptions, had led to the volatility of Singtel share price. The divestment of NetLink Trust in 2017 had provided much support for Singtel share price but the “feel good” factor evaporated soon as reality started to sink in for Singtel investors.

Although SingTel is the second largest cap in Singapore stock market, investing in this leading light of STI is not easy because this counter is susceptible to short-selling attacks. Unlike local banks, it is also not Temasek Holdings’ style to defend SingTel share price through aggressive shares buyback. Thus, to make money out of this counter, investors must have a long-term strategy of entering at the right price.

The Moody’s report certainly provided a basis for short-sellers to target Singtel share price yet again. In the week of 4 March, short selling activities on Singtel share price surged to an eye-popping [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: March 13, 2019 — 12:18 am

4 Comments

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  1. Hi, I had taken a look at Singtel about 2 years ago. While the troubles with its foreign telco partners are pretty obvious to the investment community, what is not so obvious is the gangrene that is lying underneath the local telco behemoth’s fat belly. The “gangrene” in question is Amobee. Since its acquisition in 2012, the unit has failed to generate a profit and continues to burn cash till this day (if I am not wrong). While burning cash is fine if you are a VC backed by an entity with oil cash to spare, it may not be so for Singtel shareholders. Such media operations especially those in the States, need constant cash burning to gain market share so that they can hopefully scale (and destroy their competitors while they are at it) to reach profitability & market dominance eventually. You do not need to look further for similar case studies than Singtel’s friendly partner, Singpost. The latter is also besieged by the ill-fated acquisition in the States so much so that they are contemplating a sale of the unit recently. In my own humble opinion, I think it will be good for Singtel to contemplate similar plans in their annual strategic business review in the near future.

  2. Hi RandomWalk,

    Thanks for but I don’t agree with your comments because context is important here.
    You cannot compare SingPost’s acquisition to Singtel’s because we are talking about two very different business models under different management.
    It is illogical to suggest Singtel management to review their strategic business just because one of its subsidiaries made a wrong decision. That is absolutely no basis.
    Just for the records, I am not vested in either Singtel or SingPost. Just my opinion.

    Regards,
    Gerald
    https://sgwealthbuilder.com

  3. Hi Gerald, thanks for the comments. Moving away from the Singpost comparison which I admit is not of the apples to apples variety, I will be frustrated if I am a Singtel shareholder as Amobee does not bear fruit after so many years. Time will be a good judge of things I guess 😉

  4. Hi RandomWalk,

    Thank you for your reply. I think Singtel’ strategy should be to list Amobee in the long run.
    Many technology startups are loss making. Uber is one of them and is potentially seeking IPO.

    Regards,
    Gerald
    https://sgwealthbuilder.com

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