A Statistical Look at Our Big Three Telcos

Using very simple statistics, I have a few opinions about the current predicament of telcos. Stats are compared with closing market prices on 22-June.

Without considering into the qualitative aspects of our three listed entities:
(a) M1 has a cash yield of about the 7.12%. This means as a business owner, can look forward to a cash return of 7% after buying over the company as whole. This is simply cash flow from last reported year over market cap.

On an average of 10 years, this cash yield is 8.77%. Unlike Starhub, M1 management did not indicate a dividend payout in absolute or percentage terms (correct me if I am wrong, I am not a keen follower). So M1 has a distinct advantage.

Gross Margin has fallen in the last 10 years, from 23.94% to 15.97% (CAGR: -3.96%)
Net Margin has fallen from 18.75% to 12.78% (CAGR: -3.76%)

(b) Starhub has a cash yield of 7.79% based on last year's return.Given its precipitous fall over the last few weeks (and surprising 2% uptick on Friday), perhaps market is tagging it as a bargain.

The cash yield over 10 years average data is 11.79%.
However, Starhub has pledged to give 16 cents a share last year... I don't have any idea if the management will comes to their senses soon.

Gross Margin has fallen in the last 10 years from 19.24% to 15.12%. (CAGR: -2.38%).
Net Margin has fallen from 14.63% to 9.87% (CAGR: -3.86%)

(c) Big brother Singtel has a cash yield of 7.08% (from 2018 AR figures). While this sounds attractive given the dividend strength (in terms of cash flow), Singtel would probably struggle to pay if free cash flow falls below 2.857B. The average over the last 11 years is 2899B or so.

On an average of 11 years, Singtel's cash yield is 6.72%.

Gross Margin has fallen (less drastically so) from 29.99% to 27.55%.
Net Margin from 26.68% to 16.19% (CAGR:  -4.44%). This net margin drop looks drastic because I excluded the divestment from Netlink Trust, which is non-recurring. With it, the net margin is 27.25% (CAGR: 0.19%).

My opinions
(i) If Starhub have a more sensible dividend payout, it is a better buy given the cash yield of 7.79%. Unfortunately, a downward adjustment of dividends is likely to be succeeded by a downward adjustment in prices... this makes market timing close to impossible.

While it is the cheapest, it isn't that much cheaper. Take note: Starhub have the worst gross margin drop, as well as the worst net margin.

(ii) Singtel's gross margin over the years suggest they have the most capable management among the three. The lack of special dividends from divestment is understandable, and not because it was stingy. Stop wishing for the special dividends.

(iii) There is little difference between Singtel and M1's cash yield, meaning they are almost as cheap as each other! But it is only for the past year.

*****

Trade carefully, and do note that there are...... more than just these 3 companies in SGX, and there are more than just SGX in the world.