Singtel share price lingers at decade lows on cloudy dividend visibility

• Singtel’s stock price has been staying around its cheapest levels in a decade
• Recent good news on a quarterly revenue recovery gave a temporary uplift to the stock
• Analysts continue to see value in its businesses, and expect its earnings to recover

What’s the latest on Singtel’s stock?

Singapore Telecommunications (Singtel) on Thursday (03 December 2020) morning saw active trading in its shares, as investors continued to sell down the blue-chip despite the stock trading at a depressed valuation.

The stock dropped 1.7% to an intraday low of S$2.28 within the first few minutes of Thursday’s opening bell. It then regained some ground to trade at S$2.33 as at 11.38am, inching up 0.4% from the previous day’s close.

This also came as the benchmark Straits Times Index, of which Singtel is a constituent, rose by 0.2% to 2,816.67 points.

Volume clocked for Singtel shares was 15.7 million shares by then, which made the counter the most heavily traded by value on the stock exchange.

Year to date, the stock price has slumped almost 31%.

What is causing share price weakness to persist?

The telco’s underwhelming earnings performance and cloudy dividend visibility have been to blame for the prolonged downtrend in its stock, according to analysts.

Singtel’s mobile services revenues were hit by shrinking average revenue per user (ARPU) during the April-June period this year. This was dragged by sharp falls in roaming, prepaid usage and excess data used due to work-from-home measures and travel restrictions.

Although the group’s revenue later improved quarter-on-quarter for the July-September period, outgoing chief executive officer Chua Sock Koong said this recovery from the April-June trough was ‘still quite tentative’. And on a year-on-year basis, Singtel’s underlying net profit, with exceptional items excluded, still decreased by 36.2% to about S$837 million.

The latest earnings, announced on 12 November, gave a short-lived boost to the stock price, which rose about 13% from 11 November to peak at S$2.51 on 24 November, before the optimism waned and the sell-off returned.

Analysts remain bullish on Singtel

Yet, the majority of analysts who cover the telco are keeping their hopes up.

The stock has been rated a ‘buy’ by 15 analysts and a ‘hold’ by another four, with an average target price of about S$2.83 as at 02 December.

Morningstar Inc was the latest to upgrade Singtel, recommending ‘hold’ with a S$2.20 target on Wednesday. Meanwhile, some of the more aggressive targets included S$3.35 by Credit Suisse and S$3.21 by Macquarie, with both giving an ‘outperform’ call.

Maybank Kim Eng reinitiated coverage on Singtel on Monday (30 November) with ‘buy’ and a S$2.88 price target, citing expected earnings recovery because ‘the worst is over’.

The brokerage noted that at the stock’s current cheap valuations, the market is ascribing almost zero value to the company’s core businesses.

Are you planning to trade Singtel shares?

Are you feeling bullish or bearish on the Singtel stock? Whatever your view, you can use CFDs to trade both rising and falling markets, through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) a company’s shares using CFDs, follow these easy steps:

• Create an IG Trading Account or log in to your existing account
• Enter ‘Singapore Telecommunications’ in the search bar and select it
• Choose your position size
• Click on ‘buy’ or ‘sell’ in the deal ticket
• Confirm the trade