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SingTel’s Q4 Results: More Than Meets The Eye
Tradeable, Tradeable Ideas | 16 May 2014
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By: Lim Si Jie
Articles (169) Profile
  1. SingTel’s recent “positive” results is not as positive as portrayed.
  2. Decreasing revenue and net profit is a pointing towards a changing ecosystem in the telecommunication industry.
  3. RSI and Stochastics at overbought levels signals time to sell SingTel.

Release of FY 2014 Results
SingTel recently announced its Q4 results ending 31st March 2014. Singtel’s Q4 results seem pretty positive at first glance.

SingTel reported a resilient fourth quarter, with net profit up 4 percent year-on-year to $898 million even as the Australian dollar and regional currencies weakened significantly against the Singapore dollar. According to SingTel’s statement, net profit would have grown 13 percent if it was compared on a constant currency term.

However, one thing in particular that I am rather doubtful about is SingTel’s constant reiteration of the phrase “constant currency term” in their announcement. In my honest opinion, the constant need to emphasize on that phrase is like a student who didn’t do well in their exams and constantly putting the blame onto external factors.

Source: Singtel Q4 Results Presentation Slides
Source: Singtel Q4 Results Presentation Slides

From Singtel’s presentation slides, we can actually see that the increase in net profit was due to lower net finance expenses as well as exceptional losses in the prior year. An increase in net profit is definitely good news to an investor. However, if the increase is due to the lowering of expenses, it wouldn’t have such a great impact.

Furthermore, the exceptional losses in the previous year allowed for SingTel to show a greater percentage increase in the numbers. It does not actually show any clues of any improvement in the company’s core operations.

IDA Fine
SingTel has been fined a record $6 million by Infocomm Development Agency (IDA) for an October 2013 fire that brought down multiple communications services which affected 270,000 subscribers including government agencies and financial institutions. 

IDA has imposed a financial penalty of $6 million on SingTel for failing to meet its obligations under the Service Resiliency Code.
IDA additionally observed weaknesses in SingTel’s network and practices:

  • Outdated work practice of using lead sealants in the cable chamber which required hot works to be carried out (which led to the fire).
  • A single point of failure in the Exchange where cable rings were temporarily rerouted due to construction work in the vicinity of the Exchange.
  • Wrongly assuming that fibre paths were diverse for certain enterprise customer services without fully testing them. 

Although $6 million represents a mere 0.2 percent of Singtel’s net profit in FY 2014, it is the amount of cost that Singtel has to bear to improve its network and practises which worries me as an investor. Although I may not be an expert at the technicality of telecommunication networks and practices, it will definitely cost Singtel money, for sure.

Singtel-Samsung Tie-up
SingTel recently announced a tie-up with South Korean firm Samsung Electronics in a bid to drive mobile data growth in the telco’s emerging markets.

SingTel has launched a slew of regional initiatives, which include paying for Samsung Apps via billing, regional mobile app development challenge, direct access to selected apps and mobile plan services.

This is expected to boost smartphone penetration and data adoption in developing markets such as the Philippines, Thailand, India and Indonesia.

In my opinion, this is SingTel’s strategy to increase their revenue from new markets given that IDA has made it clear that all Singapore telecommunication services cannot increase existing subscription fees for 4G networks for now.

In addition, traditional mobile services such as short messaging service (SMS) are facing fierce competition from mobile messaging apps like Whatsapp and WeChat, prompting SingTel to search for new sources of revenue by targeting developing markets.

Hint Of Dropping Revenue
Source:, Charts on SingTel's revenue (top) and net profit (bottom).
Source:, Charts on SingTel’s revenue (top) and net profit (bottom).

This is confirmed by the drop in revenue and net profit at the end of 2013. Revenue fell by 3.41 percent in 2013 while net income fell by 12.04 percent due to higher SG&A expenses. The changing eco system of the telecommunication industry is a worrying sign for Singtel in the long run.

RSI And Stochastics At Overbought Levels

A technical analysis of SingTel's chart.
A technical analysis of SingTel’s chart.

Both RSI and stochastics signal that SingtTel is likely to be very much overbought in the short term. With resistance level at $3.83, I am inclined to go for a bearish call on Singtel in the near term. Now may be a good time to take your profits while SingTel’s valuation is still high.

#Bearish In The Long Run
I am thus bearish on Singtel in the long run in terms of both fundamental and technical analysis.

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Si Jie is no stranger to investing having started his journey at a young age. He is heavily influenced by acclaimed investors such as Benjamin Graham, Peter Lynch, and John Rothchild.

Please click here for more information about this author.

Singtel  3.240 +0.05 +1.57%   
Business: Asia's leading communications group. [FY19 Turnover] Mobile Comm (31.1%), Data & Internet (19.2%), Infocomm Technology (17.5%), Sale of Eqmt (16.5%), Digital Biz (7.2%), Fixed Voice (5.2%), Pay-TV (2.1%), Leasing (0.8%), others (0.4%).

Insight: May-19, FY19 operating revenue remained flat at $1... Read More

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