Singapore Telcos

Phillip Securities Research, March 10

WE remain cautiously positive on the sector as the telcos continue to provide attractive dividend yields and stable earnings growth. Data monetisation will continue to drive earnings growth ahead. We expect data monetising in Singapore to continue gaining good traction in FY2014.

SingTel continues to deliver moderate earnings growth despite adverse FX movements and lower Optus revenue, due to improved margins on effective cost management. However, we have concerns over business outlook for Optus which operates in a challenging environment that is dominated by Telstra in Australia.

M1 continues to be our preferred top pick, as we think it stands to benefit most on improving mobile dynamics in Singapore. M1 proposed special dividends of 7.1 Singapore cents per share, which would contribute to total dividend yield of over 6 per cent for FY2013.

Overall, we think the telcos continue to be attractive investments, providing earnings as well as dividends growth potential.