Telecom Sector Singapore - DBS Research 2020-04-01: TPG’s Commercial Launch After A Long Wait

Telecom Sector - DBS Research | SGinvestors.io NETLINK NBN TRUST (SGX:CJLU) STARHUB LTD (SGX:CC3) SINGTEL (SGX:Z74)

Telecom Sector - TPG’s Commercial Launch After A Long Wait

  • TPG’s commercial launch is along the expected lines; concerns regarding sub-optimal coverage and voice-call experience.
  • We continue to forecast a 10% drop in mobile service revenue in 2020 (vs 6% last year) due to COVID-19.
  • See attached PDF report for comparison of TPG's price plan with existing plans of MyRepublic, Zero1 and SingTel GOMO.
  • NetLink Trust (SGX:CJLU) is our top pick for earnings resilience and ~5.8% yield.
  • We also like SingTel (SGX:Z74) for ~5.8% dividend yield, nearly +2 standard deviation (SD) of its mean and StarHub for ~7% yield.



TPG has unveiled a SIM-only plan at S$10 monthly for 50GB of data.

  • TPG has acknowledged its current lack of adequate coverage in underground MRT tunnels. As we understand, TPG’s voice-call experience is also sub-optimal due to the lack of a 3G network to plug the gaps in its newly-built 4G network.


TPG’s 400k free subscribers (4.4% subscriber share) may start churning out.

  • TPG intends to target
    • parents buying a first SIM card for their children,
    • users with a second or third smartphone device,
    • foreign workers.
  • In our view, parents have an option to buy cheap plans of S$10 per month from the likes of MyRepublic with superior network coverage and voice-call experience. As for foreign workers, telcos need extensive distribution network to target them.
  • TPG might appeal to a niche market of consumers who use a second or third smartphone device to stream video outdoors. TPG currently has ~400k free subscribers (4.4% subscriber share), some of them may churn out once TPG begins to charge for its service, benefitting existing players.



Netlink is our top pick for 5.8% yield, we also like Singtel for ~5.8% dividend yield and StarHub for ~7.0% yield.

  • NetLink Trust is trading at ~5.8% dividend yield near its +1SD yield of 6.0% derived from a 90-basis point (bp) reduction in +1SD yield of industrial S-REITs.
  • SingTel is trading at ~5.8% yield translating into +2SD yield over the last 15 years. A key catalyst for SingTel might be higher-than-expected dividend per share (DPS) of 15 Scts in FY21F versus our projection of a 14-Sct DPS.
  • StarHub (SGX:CC3) is trading at ~7.0% yield (vs +1SD yield of 7.8%). A key sector catalyst might be SingTel and StarHub-M1 jointly securing a nationwide 5G licence each in mid-2020, leaving TPG without a future-proof network, leading to consolidation in the sector.
  • See attached PDF report for comparison of TPG's price plan with existing plans of MyRepublic, Zero1 and SingTel GOMO.
  • See also attached PDF report for comparison of regional peers' valuations.





Sachin MITTAL DBS Group Research | https://www.dbsvickers.com/ 2020-04-01
SGX Stock Analyst Report BUY MAINTAIN BUY 0.950 SAME 0.950
BUY MAINTAIN BUY 1.400 SAME 1.400
BUY MAINTAIN BUY 2.850 SAME 2.850



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