Telco woes

This is my first blog post on investing. Decided to share on telcos in this blogpost. With the recent drop in the stock prices of two local telcos, M1 and Starhub, they are a possible good buying opportunity.

      M1

            Starhub

Currently M1 offers a dividend yield of over 5% based on the latest price of $3.38, this also seems likely to increase as its profits increased slightly for the first quarter this year and assuming it maintains a approximated 75% payout ratio. 

Starhub offers a dividend yield of ~5% according to the latest price of $4.06. Starhub has a bleaker prospect as profits for the first quarter dropped marginally, however, it has paid a consistent 20 cent dividend annually for the past 5 years

These seem rather attractive especially considering the relatively stable businesses that telcos enjoy. But all that glitters is not gold, the risk of MyRepublic launching a bid for the 4th telco in Singapore poses a threat to this high dividend yield. The competitive nature of the telco business where customer loyalty is in my humble opinion virtually non-existent and the lowest price wins works to the detriment of these two telcos. The impact of this would take a few years to materialize as contracts between the telcos and consumers take around 18 months to expire. However, this is a risk factor that investors would have to take careful note of.

Notwithstanding, I think that these two telcos may offer reasonable value at their current prices and definitely worth a thought for the value investor.

(Stock charts from https://sg.finance.yahoo.com)

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