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SINGTEL, M1, STARHUB: THREE REASONS TOM K IS STAYING AWAY

SINGTEL, M1, STARHUB
Dear readers, currently, the three local telecom stocks are trading as follows:

a) Singtel: $3.14 OVERSOLD

b) M1: $1.62 JUST COME OUT FROM OVERSOLD

c) Starhub: $1.64 OVERSOLD

The common thread running through the three stocks is that year-to-date, the three telecom stocks are trading at much less than their year-to-date highs.

While some investors may think that these telecom stocks are trading at a discount and would like to bargain hunt these stocks, I would prefer to stay away from the telecom stocks for the following three reasons:

1) Landscape has changed: once upon a time, the telecom stocks were pure telecom plays. But with the advent of the internet and then the mobile, the business of the telecom companies are actually data and more of data especially mobile data than telecom services. And as could be seen from the foray of MyRepublic into mobile data front, the businesses of the three telcoms are no longer just their fortes; smaller new players could come into the fray. I do not rule out the fact that smaller new players could be disrupt the current data business model in Singapore in the future.

2) Rising interest rates: in a traditional sense, telecom stocks are often deemed attractive for its decent dividends yields: around 4% to 5% per year. Telecom stocks are often viewed as dividends plays. But with interest rates expected to further head north with the increasing interest rates by the US Federal Reserves, telecom stocks would no longer be deemed as attractive.

3) Singapore stocks markets is small: let us don’t deny this fact. Though Singtel, M1 and Starhub are considered the biggest telecom players here, the more practical fact is that Singapore is ultimately a small market. Eventually, the three telecom businesses would have to look at overseas markets to grow their businesses; they are already doing so, especially Singtel. But from what I have noticed, whenever local businesses try to penetrate overseas markets, they would have to manage and navigate a fundamentally complete terrain and not many would be able to manage the overseas competition well. Though this point here may apply to all other kinds of stocks in Singapore stocks if we talk about overseas diversification, in this case we are talking about not a good with a Unique Special Proposition but a more general commodities in telecom and data

Thus, I will be staying away from telecom stocks in Singtel, M1 and Starhub. Join the emailing list to receive regular Financial and Singapore stocks newsletters too! Like" me on Singapore Stocks Investing Facebook page to receive all posts on your Facebook as well as read more articles. Follow me on Twitter too.


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Formerly Singapore Stocks Investing, an Associate blog of SG Stocks Investing, connect with me here.

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