Singtel’s short sell volume explodes as share value keeps sliding

Singapore Telecommunications' (Singtel) share price continues to struggle, despite a slew of new fiscal measures introduced by the Singapore government on Thursday 26 March, to help businesses cope with the coronavirus pandemic’s devastating economic impact.

As at market closing on Monday 20 March, the group’s share price fell 5.5% from last Friday 28 March’s finishing mark of S$2.56 per share to S$2.42.

This is even lower than the level achieved two weeks ago, when the Singtel share price had sunk to an 11-year low.

On Wednesday 25 March, short selling on the Singtel counter also hit a record high of 6.9 million shares. For the week of 23 March to 27 March, nearly 19 million securities in total were shorted, according to Singapore Exchange data.

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Singtel to cease streaming service HOOQ Digital

On Friday, Singtel had also announced that it was commencing a creditors’ voluntary liquidation of video streaming service HOOQ Digital, a joint venture company in which the group has an indirect 76.5% effective interest.

The closing of HOOQ ‘is not expected to have any material impact on the net tangible assets or earnings per share of Singtel’, the group stated in a Singapore Exchange filing.

At the conclusion of its 2019 financial year ended 31 March 2019, HOOQ had accumulated US$70.8 million in liabilities, according to the Accounting and Corporate Regulatory Authority. While revenue increased over 100% last year, pre-tax losses grew from US$56.6 million in 2018 to US$62.5 million in 2019.

What are analysts’ latest price targets for SingTel shares?

Following the group’s announcement to dissolve HOOQ, as well as the Singapore government’s enhancement of the Wage Credit Scheme, DBS analyst Sachin Mittal has raised his 12-month share target ‘buy’ price on Singtel’s equities to S$2.85 from S$2.80 per share previously.

He cited a possible 4.5% growth in 2021 earnings as well as a 2.5% increase in 2022 earnings, thanks to a bottom-line boost of between S$60 million and S$65 million for each of those years that will likely arise from the liquidation of HOOQ.

He also factored in a one-off capital injection of S$65 million in 2021 provided by the Enhanced Wage Credit Scheme, which will see firms receive a 25% subsidy of all workers’ wages – up from the 8% announced at the start of the virus outbreak two months ago.

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On the back of the stronger earnings forecast, he has raised the projected value of Singtel’s core Singapore and Australia business to S$0.77, from S$0.71 per share previously.

Furthermore, Mittal wrote that if Singtel is able to lower the capital expenditure with a slower 5G network rollout, dividends per share (DPS) could be higher at S$0.15 per share, implying a 5.9% yield at the current share price.

Finally, he added: ‘Our worst-case valuation of Singtel in case Covid-19 becomes as severe as the Global Financial Crisis of 2009, is S$2.18 based on an all-time high dividend yield of 6.2% (based on a S$0.135 DPS), which implies potential loss of 10% including dividend yield.’

Singtel has a 15-year average dividend yield of 4.5%.

Read also: Why did the Singtel share price sink to an 11-year low?