LIFETIME MEMBERSHIP 27 May 2021 will be destiny day for Singtel share price as the full-year financial result will be unveiled. Yet on 14 May 2021, Singtel management shocked investors by revealing that the results for financial year ended 31 March 2021 are expected to include net exceptional losses of $1.21 billion. Should investors run for their lives before Singtel share price blew up in pieces?
In my opinion, credit must be given to the management for giving retail investors ample warning about the upcoming headwind. Hand on heart, I am impressed by the management’s transparency. With this upfront caveat, at least most investors will be mentally prepared for the 27 May result. However, at the back of most investors’ mind must be the scale of collateral damage on the final dividend.
Widely viewed as a dividend stock, Singtel is extremely popular among Singaporean investors as many retirees depend on this evergreen counter for passive income. For FY2020, underlying net profit declined 13% to $2.46 billion. As a result, the total dividends decreased to 12.25 cents from 17.5 cents in FY2019. With the bombshell revelation of net exceptional losses, I expect Singtel share price to come under severe pressure next week.
One important thing to highlight is that the losses are attributed mainly to non-cash impairments from Amobee, Global Cyber Security Business and Optus. In this regard, I foresee that there is still healthy amount of cash sufficient for some “respectable” final dividends to be made, albeit at a much lower level as compared to previous years. Question now is whether Singtel share price will suffer carnage from the upcoming fallout.
Prior to the 14 May announcement, Singtel share price has enjoyed good support from the big boys. In the week of 10 May, this counter is the second among the top 10 institutional net buy stocks. Given the turn of event, it remains to be seen if the big boys will continue to buy into Singtel share price.
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in Singtel before. Whether Singtel share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.
Singtel share price braces for more volatility
It is not the first time that Singtel incurred billion dollars of exceptional losses. In 2019, the Indian Supreme Court fined Singtel associate Airtel a whopping $4 billion. Due to this, Singtel had to set aside a staggering provision of $1.93 billion (pre-tax) for the penalty. Because of this, Singtel share price struggled throughout 2019. Based on historical trend, Singtel share price should suffer the same fate this round. After all, with the on-going COVID-19 pandemic, the operating condition remains extremely challenging.
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