Singtel Slashes Final Dividends

Singtel Slashes Final Dividends

Singtel currently makes up 2.38% of my stock portfolio. The telco had announced their 4Q2019 financial results on 28th May 2020. The underlying net profit was down 13% to S$2.46 billion due mainly to weakness in Australia. The weakness in Australia was due to continuing data price competition and weak consumer sentiment, and the effects of lower equipment sales and margins and low NBN resale margins.

In consideration of Airtel’s exceptional charges of S$1.80 billion, the net profit declined by 65% to S$1.08 billion as compared to S$3.10 billion a year ago. The exceptional charges refer to regulatory costs, including the adjusted gross revenue matter and a one-time spectrum charge. Singtel took a net exceptional charge of S$302 million this quarter, mainly arising from Airtel’s provision for the spectrum charge.

Operating revenue for the full year also declined 2% in constant currency terms at S$16.54 billion, a result of lower mobile service revenue and equipment sales, aggravated by the onset of COVID-19.

Debt

Singtel’s group net debt stood at S$12.50 billion including S$2.1 billion of lease liabilities recognised under the new accounting standards. I believe free cash flow is something investors are concern about. The good news is that free cash flow rose 4% to S$3.78 billion for the full year with the impact of changes in accounting standards, positive working capital and lower tax payments.

Dividends

I have bought into Singtel for its consistent payout of dividends. Singtel had announced a final dividend of 5.45 cents. The total dividends paid in FY2020 is 12.25 cents as compared to 17.5 cents paid in FY2019. This is a 30% reduction in dividends.

Based on the current share price of S$2.53 and FY20 dividend payout of 12.25 cents, this translate to a current dividend yield of 4.84%.

Singtel Share Price

Summary

The outlook for Singtel remains weak due to stiff competition from other Telcos in different countries. Even though Singtel has won the 5G spectrum, my opinion is unless there is some value gained out of 5G spectrum, this can hardly translate into profits for Singtel. This is not to mention about the capital expenditure required into developing the infrastructure for thhe 5G network.

I am not too concern about the weak share price of Singtel as it only makes up a minority of my stock portfolio. The catalyst for Singtel comes from its regional associates. Since the COVID-19 pandemic has impacted businesses across the globe, the regional associates are impacted as well in a way or another. Meanwhile, I shall hold on to Singtel in view of the day it regains its glory in terms of dividend payout.

Summary of February 2020 Transactions

Summary of February 2020 Transactions

Today is a special day (29th February 2020). Instead of the usual 28 days, we have 29 days in this month of February 2020, which is also called the leap year. We are also in the second month of the COVID-19 outbreak where it causes disruptions or instability to the current economy.

Earlier this month, the stock market seemed to have ignored the impact of the COVID-19 to the economy. This is based on my observation on the Straits Time Index (Read more: Impact of COVID-19 to Straits Time Index) However, just a few days ago, I observed that the stock market started to react to the impact of the COVID-19 outbreak. It is hard to tell whether the downtrend is short term or long term. The Straits Times Index (STI) closed at 3,011.08 yesterday.

The current situation has proven that we should always have some form of emergency funds that can tide us over 6 months or more should we get retrenched due to financial crisis. Thus, I continued to purchase Singapore Savings Bonds monthly even though the interest rate has fallen. The average interest rate of March Singapore Savings Bond is 1.71% if you hold it for 10 years. Singapore Savings Bonds currently makes up 17% of my entire investment portfolio.

I did not make any stock purchases this month but definitely I am looking around as the stock prices of many counters in my watchlist has fallen this week and they provide an attractive dividend yield in the long run. Some examples are Singtel, SPH REIT, Suntec REIT, Mapletree North Asia Commercial Trust.

Singtel

Closing Price: S$3.00, Current Dividend Yield: 5.83%

Summary of February 2020 Transactions

SPH REIT

Closing Price: S$1.01, Current Dividend Yield: 5.54%

Summary of February 2020 Transactions

Suntec REIT

Closing Price: S$1.70, Current Dividend Yield: 5.59%

Summary of February 2020 Transactions

Mapletree North Asia Commercial Trust

Closing Price: S$1.10, Current Dividend Yield: 6.57%

Summary of February 2020 Transactions

 

Last but not least, here is a quote from Warren Buffet.

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”

– Warren Buffet

Warren Buffett

 

Singtel 3QFY20 Net Profit Fell 24% – Should You Buy?

Singtel 3QFY20 Net Profit Fell 24% - Should You Buy?

Singtel had released its 3QFY20 financial results on 13 February 2020. The financial results are not so rosey, with operating revenue declining 5% to S$4.38 billion due to lower equipment sales, weak business sentiment and spending, continued price erosion in carriage services and heightened market competition.

Net Profit After Tax was down by 24% to S$627 million due mainly to the weakness in the enterprise business, the impact of the final settlement of a gain on the Airtel Africa pre-IPO investment and lower exceptional gains.

3QFY20
(S$ Mil)
3QFY19
(S$ Mil)
% Change
Operating Revenue4,378.34,626.1(5%)
Net Profit After Tax627.2822.8(24%)

As shared previously, 48% of Singtel’s net profit comes from its regional associates.

Singtel 3QFY20 Net Profit Fell 24% - Should You Buy?

I am glad that Profit Before Tax from its Regional Associates increased 15% to S$393 million. This was driven by strong data growth across all markets. Airtel’s losses narrowed, on the back of strong 4G customer growth, customer upgrades and price increases in India. Its African operations also saw growth momentum in carriage and mobile money services. The stronger operating performances mitigated higher costs and depreciation from its network expansion.

Singtel 3QFY20 Net Profit Fell 24% - Should You Buy?

Debt

Singtel’s Net Debt stood at S$12.4 billion. Net debt gearing ratio stood at 31.7%.

Free Cash Flow

Free cash flow for the nine months was up 8% at S$2.74 billion.

Singtel 3QFY20 Net Profit Fell 24% - Should You Buy?

Current Dividend Yield

Singtel 3QFY20 Net Profit Fell 24% - Should You Buy?

If Singtel maintains the dividend pay out of 17.5 cents, based on the current share price of S$3.17, this translates to a current dividend yield of 5.52% which I deemed attractive given most REITs current yield have fallen to slightly above 5%.

If Singtel is to cut its dividend pay out to 15.8 cents (based on year 2012), the current dividend yield will be 4.98%.

Note: Singtel has a dividend policy to maintain pay out of 17.5 cents until March 2020.

Potential Catalyst

A joint application with consortium partner, Grab, for a digital full bank licence in Singapore has also been submitted in December 2019. The license will allow them to lend monies to companies. Singtel and Grab will know if their application has been approved by mid 2020.