Singapore Telecommunications BUY
Price/Target: S$3.64/S$4.56 Mkt Cap: US$40,766m Daily Vol: US$70.4m 1-Yr Hi/Lo: S$4.53/S$3.64
Steep Selldown Unwarranted
Analyst: Jonathan Koh, CFA
- We have identified two possible reasons for the selling on SingTel this morning:
- An article on www.techinasia.com reported that MyRepublic has raised US$16m (S$23m) from various investors to finance its bid to be the fourth mobile operator in Singapore. However, we noticed a discrepancy. The article says part of the funding comes from "Brunei Telco DST Communications". We want to clarify that DST is not a full fledged telco in Brunei. It is a internet service provider that offers fixed broadband services in Brunei (profile is similar to MyRepublic's existing business). It is owned by Datastream Technology Sdn Bhd, which is headquartered in Malaysia. Also, MyRepublic needs to incur capex of S$5m to participate in the HetNet trial conducted at Jurong East. Thus, MyRepublic still does not have sufficient financial resources to embark on its bid to be the fourth mobile operator (reserve price for spectrum set-aside for new entrant tentatively set at S$40m).
- Media in Australia has reported on the potential merger between M2 Group and Vocus Communications to create a $3b company, which creates more competition down under. We want to highlight that M2 and Vocus are smaller competitors in Australia. In fact, the on-going merger between TPG Telecom and iiNet would pose a greater competitive threat. In any case case, the setup of NBN would level the playing field which gives Optus and other competitors an opportunity to grow their fixed line businesses. At this juncture, mobile accounted for 76% of operating revenue for the Consumer business in Australia.
- We believe the sell-down this morning is not warranted and re-iterate our BUY recommendation for SingTel.
best regards,
Jonathan Koh, CFA
This transmission has been issued by a member of the UOB Kay Hian Group for the information of the addressee only and should not be reproduced and/or distributed to any other person. Each page attached hereto must be read in conjunction with any disclaimer which forms part of it. Unless otherwise stated, this transmission is neither an offer nor the solicitation of an offer to sell or purchase any investment. Its comments are based on information obtained from sources believed to be reliable but UOB Kay Hian Group makes no representations and accepts no responsibility or liability as to its completeness or accuracy.
