Broker analysts are similar to financial bloggers, in that both have a vested interest in making accurate investment calls. The difference comes when analysts do not have 'skin' in the game, as they are restricted from acting on their own conviction due to conflict of interest.
By listening to analyst conference calls, we can get some insights on what is keeping the analysts up at night, and the important bits of information they want to know about the company's performance down the road.
I recently listened in on Singtel's 4Q20 analyst conference call. Below are my five takeaways:
1. The first volley fired was about EBITDA margin and capital expenditures (capex) for Singtel in Singapore and Optus in Australia. However, Singtel's CEO Ms. Chua Sock Koong refused to provide any guidance at this point, but she hopes to be able to provide some numbers during mid-year. As for Australia, Optus' CEO Ms. Kelly Bayer Rosmarin highlighted the structural transition from operating a proprietary network to being a service provider on the NBN (national broadband network). As NBN works off regulated pricing, they will monitor the margins carefully. Ms Bayer Rosmarin also noted the pressure from years of discounting and heavy subsidies on the mobile side is coming off, and market repair is underway.
SS comment: I take it as a good sign that Optus and competitors are no longer engaged in a price war.
2. Another key question was about the medium to long-term outlook for Singtel's dividend. Of which, Ms. Chua replied the level of the dividend this year would be no reflection of what the dividend would be going forward [emphasis mine]. At this point however, she wouldn't comment on Singtel's future dividend policy.
SS comment: In short, the 50% dividend cut this year is not symbolic of a new trend to conserve cash.
3. In winning the 5G license, Singtel had to make a commitment to provide 50% of the population coverage in two years and 95% in five years. It was explained that the rollout of 5G is not going to be overnight (within a one to two year period), but progressively while improving the existing 4G coverage.
SS comment: I take that as a hint that the 5G capex is likely to be spread over more than two fiscal years.
4. Singtel's Consumer Singapore CEO, Mr. Yuen Kuan Moon takes it as a positive sign that the fourth telco operator in Singapore (read: TPG) has finally launched commercial service. The reason being consumers are now able to do effective comparison between price and quality of each operator's 4G network.
SS comment: From recent news (here), analysts were doubtful that TPG Telecom will be able to sustain the low price point and network quality.
5. HOOQ was Singtel's organically grown video on service provider, which the management finally decided to call it quits. An analyst quizzed whether Singtel will be looking to make bolt-on accquisitions to bolster Singtel's advertising platform Amobee. Of which, Singtel's Group Digital Life CEO, Mr. Samba Natrajan commented they would prefer to invest internally on research instead.
Conclusion:
Singtel management is cautious, and will not commit to forecasts that will come back and bite them. 5G capex is going to be a mid- to long-term cash outflow, so I would not expect any urgent requirement for Singtel to raise cash in the markets. Lastly (and gladly), the much reduced 5.45 cents final dividend is not indicative of a new trend; rather it is a conservative response to the present situation. Investors will get more visibility six months down the road.
By listening to analyst conference calls, we can get some insights on what is keeping the analysts up at night, and the important bits of information they want to know about the company's performance down the road.
I recently listened in on Singtel's 4Q20 analyst conference call. Below are my five takeaways:
1. The first volley fired was about EBITDA margin and capital expenditures (capex) for Singtel in Singapore and Optus in Australia. However, Singtel's CEO Ms. Chua Sock Koong refused to provide any guidance at this point, but she hopes to be able to provide some numbers during mid-year. As for Australia, Optus' CEO Ms. Kelly Bayer Rosmarin highlighted the structural transition from operating a proprietary network to being a service provider on the NBN (national broadband network). As NBN works off regulated pricing, they will monitor the margins carefully. Ms Bayer Rosmarin also noted the pressure from years of discounting and heavy subsidies on the mobile side is coming off, and market repair is underway.
SS comment: I take it as a good sign that Optus and competitors are no longer engaged in a price war.
2. Another key question was about the medium to long-term outlook for Singtel's dividend. Of which, Ms. Chua replied the level of the dividend this year would be no reflection of what the dividend would be going forward [emphasis mine]. At this point however, she wouldn't comment on Singtel's future dividend policy.
SS comment: In short, the 50% dividend cut this year is not symbolic of a new trend to conserve cash.
3. In winning the 5G license, Singtel had to make a commitment to provide 50% of the population coverage in two years and 95% in five years. It was explained that the rollout of 5G is not going to be overnight (within a one to two year period), but progressively while improving the existing 4G coverage.
SS comment: I take that as a hint that the 5G capex is likely to be spread over more than two fiscal years.
4. Singtel's Consumer Singapore CEO, Mr. Yuen Kuan Moon takes it as a positive sign that the fourth telco operator in Singapore (read: TPG) has finally launched commercial service. The reason being consumers are now able to do effective comparison between price and quality of each operator's 4G network.
SS comment: From recent news (here), analysts were doubtful that TPG Telecom will be able to sustain the low price point and network quality.
5. HOOQ was Singtel's organically grown video on service provider, which the management finally decided to call it quits. An analyst quizzed whether Singtel will be looking to make bolt-on accquisitions to bolster Singtel's advertising platform Amobee. Of which, Singtel's Group Digital Life CEO, Mr. Samba Natrajan commented they would prefer to invest internally on research instead.
Conclusion:
Singtel management is cautious, and will not commit to forecasts that will come back and bite them. 5G capex is going to be a mid- to long-term cash outflow, so I would not expect any urgent requirement for Singtel to raise cash in the markets. Lastly (and gladly), the much reduced 5.45 cents final dividend is not indicative of a new trend; rather it is a conservative response to the present situation. Investors will get more visibility six months down the road.
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