Temasek Dividend Stock Singtel (掌上明珠)

Posted on April 1, 2020 Written by
Temasek Dividend Stock Singtel

Temasek invests in about 40 global stocks, the largest investment by market capitalization is in Singtel (52% shareholding), jewel in the crown. Singtel (SGX: Z74) is not just the fixed deposit of Temasek (through consistent dividend payment for decades), also cash generator for over 1 millions Singaporeans who are Singtel retail investors, the most popular stock in Singapore.

Over the past few years, due to competitive global and local Telco industry (eg. new player TPG in Singapore, uncertain regional markets), despite Singtel is more defensive than other peers, share prices has dropped by half from the peak of $4.40 to $2.28/share (about 30% price dip was over the past 2 months of global stock crisis). This is relatively stronger compare with local competitor Starhub (SGX: CC3) with share prices drop to about 1/3 of peak price. Even M1 was acquired and delisted during this period. TPG is listed in Australia (ASX: TPM), share price has also dropped by half over the past few years.

So, this is not Singtel stock crisis (Level 1 – individual stock), rather, it is Level 2 crisis (Telco sector) and even Level 3 crisis (country level – Singapore and most Asian stock markets).

Singtel is not just a Telco giant of Singapore, also a major regional Telco in Asia Pacific (Australia, India, philippines, Indonesia). It has diversification geographically, but also suffer uncertainty in each country (eg. legal cases in Thailand and India which affect its last few quarters of earnings).

Telco industry used to be a defensive sector as usually only a few licenses are given in each country for Telco operators, nearly a sure-win oligopoly business. Introduction of smart phones in 2000s, following by 3G, 4G, etc, has helped Telco industry to grow further over the past 2 decades. The yearly capex (difference of operating cashflow and free cashflow) is usually stable, therefore Singtel’s consistent earnings have contributed to stable free cashflow, eventually predictable dividend payment 2 times yearly to shareholders for decades, about 4-5% average dividend yield over the past 10 years, better than fixed deposit interest rates of 1-2% in banks.

With recent global stock crisis, Singtel share price has dropped to 11 years low, approaching the last low recorded in 2009 global financial crisis. Singtel will announce 2020 final year report (financial year ending 31 Mar 2020) in a few months time but results are predictable to be much weaker than last year due to losses in Bharti (India investment) and weaker earning over the past 2 quarters (especially with Coronavirus).

Singtel is defensive partly because it is a major Telco operator, price competition could affect its earning but few people may terminate the mobile phone lines in this internet era. During global financial crisis, perhaps some people may cut 3 meals into 1 meal to save cost but likely will still keep the phone line which is the meal of “soul’.

This implies despite Singtel has more downside in both business (especially for the coming 2020 annual report) and stock prices (especially if Coronavirus is beyond control, resulting in global financial crisis), it is unlikely the company would go bankrupt with share price dropping to $0. Singtel is a dividend giant stock, current dividend yield is nearly 7%. Assuming the earnings, cashflow and dividend available may drop by 50% (due to 1-time loss in Bharti), there is still 3.5% dividend yield.

Singtel Z74 SGX Historical Stock Price

An investor who is interested in Singtel may apply progressive entries at low optimism level, eg 5 times x 20%. Assuming $2.50/share is the first trigger at low optimism. and investor may consider (just a sample investing plan, not a personal financial advice, please make your own decision):

$2.50 or $X – First Entry (Level 1-3 crisis)

$1.50 or $Y – Second Entry (Level 4 crisis)

$0.50 or $Z – Third Entry (Great Depression, when people cut from 3 meals to 1 meal, still cannot survive, Telco is no longer important)

Assuming 3 levels of crisis happen, average price will be $1.50/share over 3 entries. Investor may also consider these prices after it drops to bottom and recover again (uptrend), no need to suffer with falling prices in bear market. The strategy is personality dependent, counter-trend (contrarian investor) and/or follow-trend (trader mindset).

Singtel may remain at low optimism (below $2.50/share) for several years, investors could collect >3% dividend yield (pessimistic assumption) during the winter period of crisis. This way of averaging method (investors may define own $X, $Y, $Z prices above, the sample prices given above are just for example purpose).

The strategies above may be applied for any dividend giant stock. There are about 100 global dividend giant stocks (you may learn the strategies from Dr Tee in 6 days comprehensive course or note down a few sample stocks in free 4hr workshop for the public), some are much stronger and more stable than Singtel. In fact, Singtel is slower in growth, more suitable for dividend investing (as if fixed deposit in stock market) at low optimism but may not suitable for growth to achieve higher capital gains.

There are many ways to make money in stocks, may not be investing, could be trading (higher probability is shorting for current stock market but risk is high due to high market volatility). It is possible for short term trader to short at bearish Telco stocks (may not be Singtel) to profit from the falling prices, especially when breaking below a critical price support, driven by fear of declining business and global events (Coronavirus, etc). So, it is possible for different persons to take different actions (Buy, Hold, Sell, Wait, Shorting) and all could make money in stocks if strategies aligned with personalities and market conditions.

There are at least 26 Temasek / GLC stocks in Singapore including Singtel, controlling shareholder with 15% or more ownership directly or indirectly (investor needs to focus only on giant Temasek stocks):
Singtel (SGX: Z74), DBS Bank (SGX: D05), ST Engineering (SGX: S63), Singapore Airlines (SGX: C6L), SIA Engineering (SGX: S59), Singapore Exchange (SGX: S68), SATS (SGX: S58), Sembcorp Industries (SGX: U96), Sembcorp Marine (SGX: S51), Olam (SGX: O32), CapitaLand (SGX: C31), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Ascendas Reit (SGX: A17U), Ascott Hospitality Trust (SGX: HMN), Ascendas Hospitality Trust (SGX: Q1P), CapitaLand Retail China Trust (SGX: AU8U), Ascendas-iTrust (SGX: CY6U), Keppel Corp (SGX: BN4), Keppel Reit (SGX: K71U), Keppel DC Reit (SGX: AJBU), Keppel Infrastructure Trust (SGX: A7RU), Mapletree Logistics Trust (SGX: M44U), Mapletree Commercial Trust (SGX: N2IU), Mapletree Industrial Trust (SGX: ME8U), Mapletree NAC Trust (SGX: RW0U).

Temasek stocks portfolio also affect about 15% of STI index stocks, which has strong impact on Singapore stock market. Here are 30 STI component stocks:
DBS Bank (SGX: D05), Singtel (SGX: Z74), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Wilmar International (SGX: F34), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), Thai Beverage (SGX: Y92), CapitaLand (SGX: C31), Ascendas Reit (SGX: A17U), Singapore Airlines (SGX: C6L), ST Engineering (SGX: S63), Keppel Corp (SGX: BN4), Singapore Exchange (SGX: S68), HongkongLand (SGX: H78), Genting Singapore (SGX: G13), Mapletree Logistics Trust (SGX: M44U), Jardine Cycle & Carriage (SGX: C07), Mapletree Industrial Trust (SGX: ME8U), City Development (SGX: C09), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Mapletree Commercial Trust (SGX: N2IU), Dairy Farm International (SGX: D01), UOL (SGX: U14), Venture Corporation (SGX: V03), YZJ Shipbldg SGD (SGX: BS6), Sembcorp Industries (SGX: U96), SATS (SGX: S58), ComfortDelGro (SGX: C52).

Temasek has 40 stocks in the global portfolio, about half are giant stocks (based on Dr Tee criteria). Singtel is Temasek’s largest investment but not Temasek’s best giant stock. An investor may invest in the Top 3 Temasek giant stocks, buying lower than Temasek (hopefully with help of global stock crisis), selling higher than Temasek (if timing is right). Even the stock with business may be in trouble (eg. Olam previously, SIA currently), Temasek is a strong sponsor, likely will help if having significant investment.

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Actions on High Dividend Blue Chip Stocks (Example on Singtel)

Posted on July 21, 2018 Written by
High Dividend Blue Chip
The decision to buy high dividend blue chip stocks (eg. 5-6% dividend yield for Singapore Telco and REITs, etc) depends on 3 main strategies which have to be aligned to 3 personalities.
 
Here is an example of Singtel (SGX: Z74), a strong blue chip in Singapore, current share price at $3.31, falling nearly 25% from $4.30 / share since a few years ago, dividend yield is about 5.3%, Optimism is 28%. Let’s learn to take action (Buy / Hold / Sell / Wait / Shorting) based on different unique personality.
 
1) Trader for short term capital gains
– Singtel share price is still a falling knife (although not as sharp as M1 and Starhub which dropped more than 50% in share prices) in short to medium term stock prices, therefore may not yet a good buy for traders who need support of strong uptrend. Singtel share price is affected in short to medium terms by Level 4 (global stock market weakness), Level 3 (weaker Singapore STI index) and Level 2 (bearish Singapore Telco sector, including Starhub and M1), despite the Level 1 business is still strong for Singtel. Although current short term bearish stock market supports shorting (profit from falling price), usually a stable dividend stock with strong fundamental may not be a good choice for shorting.
 
Possible Action: Wait.
 
2) Investor for long term capital gains
– Possible to be a contrarian investor to buy low for Singtel (it was less than 25% Optimism when price is nearly $3, even it may get lower in share price, long term holding would have high chance of winning. The concern is more on short to medium term share prices correction, especially global / US stock market is still at high optimism, there is a potential threat of global financial crisis, it may not be wise to hold a stock unless it is defensive with high growth in nature. Singtel is considered a defensive stock but a slow growth stock.
 
Possible Action: Wait.
 
3) Investor for long term passive income
– Since the objective is to collect dividend, falling in share prices have exchanged for higher yield for Singtel (5.3% currently). Singtel fulfills the criteria of a dividend stock with stable business (despite slow growth) with stable free cashflow and consistent dividend payment. The critical consideration for passive income investor is on the overall return. If one has $100k capital, is it satisfied to get $5.3k annual return (regardless of up and down in share prices)? What if Singtel share price drops further, yield goes up to 8%, will an investor regret of not able to get $8k dividend? So, the decision depends on reward expectation or greediness of an investor. If compares with bank interest rate (1-2%), property rental (2-3%), even current moderate yield of 5-6% dividend stocks are considered better. In general, the spread between yield of blue chip dividend stocks (5-6%) and risk-free investment (eg. 4% for CPF, 2% for Singapore Saving Bond) is narrow. The trick is on capital allocation, maximize the yield by entry in phases. It means if one could not hold the capital with little return in bank deposit, it is fine for investor to consider 5-6% return (ignoring the share price could drop by the same amount in certain week) with partial capital. Bulk of capital may be reserved for higher yield return aligning to the next global financial crisis
 
Possible Action: Buy (partial capital only) or Wait
 
It is clear by now there could be different possible actions for the same stock because the right decision has to be aligned with own personality, eg. holding for short term trading or long long term investing, aiming for capital gains or dividends or both, reward expectation and risk tolerance level, etc.
 
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Investing Strategies for Singapore Telco Stocks

Posted on February 21, 2018 Written by
 Telco Stocks - Singtel, Starhub, M1
After joining of No 4 Telco Player, TPG, the Singapore Telco stocks have been bearish in the last few years, with share price correction ranging from about 20% to 50%. Here is a quick summary based on current share prices:
 
Telco Stocks Optimism Dividend Yield
——————————————————————-
Singtel (SGX: Z74) 29% 4.9%
Starhub (SGX: CC3) 20% 7.1%
M1 (SGX: B2F) 2% 6.4%
TPG (AX: TPM) 17% 1.6%
 
TPG is a growing Telco stock in Australia, sharing the limited market share of saturated sector of telco stocks in Singapore. Both Starhub and M1 are affected more as the business depends on local Telco, while Singtel is relatively more stable as its business depends on both local and regional Asia Pacific market. M1 is severely affected with share price dropped by more than 50% but the company is still profitable, earning drops by only 25% over the last few years. It shows that Telco stocks in Singapore are over-corrected, initially was driven by news, later by weaker fundamental for Starhub & M1, then driven by the market fear of huge fall in share prices.
 
As a result, Optimism for Singapore Telco stocks are low, especially for Starhub and M1 which are <25% Optimism. Telco is usually a defensive business, after getting the limited Telco licence issued by government (oligopoly business with limited competitors), investing in infrastructure for Telco, offering services with reasonable prices, the return will be relatively stable with positive monthly cash flow. The disturbance of TPG is just a one-time correction, when the market share is redistributed among the 4 local Telco stocks, all the 4 companies will find their own anchor point in share prices and business earning.
 
As an investor, there are 2 Investing Strategies for Singapore Telco Stocks
1) Investing for Passive Income (Buy & Hold)
– Stable dividend payment for long term investing
 
2) Investing for Capital Gains (Buy Low Sell High)
– Buy at discounted price (eg <25% Optimism), selling at bonus price (eg >75% Optimism)
 
For Passive Income Strategy, Singtel barely fulfills the criteria with 4.9% dividend yield with support of a stable local and regional business, strong sponsor of major shareholder Temasek. The 4.9% dividend yield is comparable with some strong REITs, better than local bank stocks, much higher than 2% return of Singapore Saving Bonds or 1% bank interest rate. A better way of investing for income is to consider Singtel or other dividend stocks at low optimism to maximize the dividend yield, having the potential for capital gains at the same time. An investor also has the choice to consider regional and global Telco stocks which are growing, instead of depending on saturated Singapore Telco business.
 
However, in the short term, since the Telco stocks are still bearish, it is possible for Telco stocks to have capital loss more than 5% when share prices drops further. Therefore, it is crucial to understand the objective: investing for long term (dividend / capital gains) or trading for medium / short terms. A stock for long term investing may not be suitable for short term trading.
 
For Capital Gains strategy, both Starhub and M1 fulfill the criteria with Optimism < 25%. In the short term, M1 has better price support than Starhub. Choices of Starhub and M1 should not base on dividend yield of 6-7% because the high yield is due to price drops, not due to earning or dividend growth. Since global stock market is over 80% Optimism, despite Starhub and M1 are at low optimism, the positioning is mainly based on trading to buy low sell high for short to medium terms. The signal for entry depends on the recovery of short term stock prices and business performance. If not, there is a risk of capture the falling knife.
 
There are many ways to make money in Singapore Telco stocks and global blue chip stocks, learn further from Dr Tee.
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