Brokers' take
Telcos | Neutral OCBC Investment Research, Feb 21
All three listed telecommunications service providers in Singapore ended 2017 with muted results. Looking ahead, the telecom sector will remain under pressure with the entry of two new Mobile Virtual Network Operators (MVNOs) as well as the impending entry of TPG.
Based on the closing price on Feb 20, we deem M1's valuations fair with forward price to earnings (PE) and forward enterprise value to Ebitda (EV/Ebitda) trading at 0.7 and 1.2 standard deviations below five-year averages, respectively, reflecting its muted outlook.
StarHub's valuations seem high with forward PE and forward EV/Ebitda trading at 0.9 standard deviations above and only 0.4 standard deviations below five-year averages, respectively.
On the contrary, Singtel, the dominant telco in Singapore and also the one with the most diversified earnings base among the three, is trading with forward PE, forward price to book, forward dividend yield and forward EV/Ebitda at 1.9 standard deviations below, 2.8 standard deviations below, 2.4 standard deviations above and 1.5 standard deviations below five-year averages, respectively.
We recommend investors to switch out of StarHub and into Singtel, given Singtel's diversified and more stable earnings base. We reiterate our positive view on Singtel's longer-term outlook given its focus to grow its cyber security, infocomm tech solutions capabilities, digital advertising and other digital-related businesses.
Singapore Budget 2018 DBS Research, Feb 20
The extension of the wage credit scheme benefit companies with a large workforce within (or exposed to) the lower income group - consumer services, oil and gas, construction sectors. This could have a positive impact of 1-4 per cent on our forecasts for these consumer companies - HRnetGroup, Sheng Siong, Jumbo Group.
The carbon tax will generally be applied upstream - for instance, the power stations and other large direct emitters that produce 25,000 tonnes or more of greenhouse gas emissions in a year, rather than electricity users.
Higher carbon taxes may have a negative impact on Keppel Infrastructure Trust (KIT) but we believe that this should be passed on to the offtaker in due course, that being a similar treatment to other variable costs across the KIT assets in Singapore. It is hard to quantify the potential carbon tax as KIT's carbon emissions are not disclosed.
Compiled by Cai Haoxiang
Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.
