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Brokers' take: Singtel earns OCBC's pick among telcos

SINGTEL has again emerged as OCBC Investment Research's top pick among telcos, the investment unit said in a note on Thursday.

It recommended a "buy" rating on Singtel with a fair value of S$4.19 a share. As at 10.02am on Thursday, Singtel was trading at S$3.69 per share.

OCBC Investment Research said: "We remain positive over Singtel's long-term outlook given its growing presence in the digital space, and reiterate Singtel as our sector top pick."

It added that Singapore's telecom sector reported lower earnings in third quarter 2017 with all three telcos reporting a decline in earnings, each one impacted by different reasons.

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Competition in the Singapore mobile market is expected to intensify with the impending entry of TPG and potentially MyRepublic, OCBC Investment Research noted.

"The increasingly competitive landscape will impact StarHub and M1 more significantly than Singtel due to higher exposure to the market. Hence, on aforementioned reasons, we expect sector outlook to stay muted and continue to project ARPU (average revenue per user) to decline 14-20 per cent over the next five years."

OCBC Investment Research said that at current share prices, M1 is fairly valued but a further downside could happen for StarHub, pending further clarity over the ramp-up of its enterprise business.

It recommended a "hold" rating on M1 with a fair value of S$1.65 a share, and a "sell" rating on StarHub with a fair value of S$2.30 a share. As at 10.07am, M1 was trading at S$1.77, and StarHub at S$2.84.

OCBC Investment Research added: "All considered, we maintain neutral on the telecom sector."

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