Tuesday, March 18, 2014
Singapore telco: Following a marketing trip by Maybank KE to Malaysia last week, clients were still on board the Buy M1/ Starhub wagon, given the duo remain the leading candidates to pay higher dividends among Singapore telcos and stand to benefit the most from data monetisation, in particular M1. Clients also resonated with Maybank KE’s cautious view on Singtel. Maybank KE thinks M1 (Buy, TP $3.86) still has capacity to pay more special dividends as there is room for earnings surprises, on the back of accelerated adoption of tiered data subscription, and its high percentage of heavy data users that are likely to upgrade their plans as old ones expire. On StarHub (Buy, TP $4.06), Maybank KE cites its strong balance sheet provides capacity for more dividends. Maybank KE feels that for SingTel (Hold, TP $3.67), investors are better off buying into listed associates, such as Bharti, for a recovery in their home markets than buying indirectly through SingTel given the risk of potential corporate actions diminishing the rewards, e.g. the talk about the sale of Shin Corp stake by Temasek to SingTel. On structural changes in the industry, Maybank KE notes now entrenched trend of declining voice/SMS amid the rise of Over-The-Top apps like Whatsapp, LINE, WeChat, KakaoTalk and Skype. Longer term, telcos need to take advantage of changes in technology, such as Voice over LTE, to provide an alternative to OTT services, and reinvent themselves as a solution or content providers instead of just being connectivity pipe providers.