Singtel is one of my largest holding in my portfolio, partly due to her status as a gigantic blue chip and a consistent dividend payer. Now that the price has fallen over 30% from its recent high, it is time to look at it again.

From fundamental point of view, the counter has been hit down due to competition from her diversified business everywhere and also in local context, the impending 4th telco and price war soon to come; have contributed to huge drop in the counter price. There isn’t any near term catalyst in view that might lift the price unless there is market consolidation or accretive acquisition that can grow the mammoth business. However any business can be owned at a good discounted price so long the business is still generating healthy cash flow and giving out good dividends. In this case, the management has committed to paying out 17cents per annual at least for the next 2 years.

Price wise, we should always buy with a margin of safety and in this case, it is hard to see huge revenue growth considering the top line of the business has been really flat in the last 10 years.

Assuming no growth and the eps remains at 10 years average of 0.23c per share (excluding any exceptional earnings), historical 10 year p/e of 15 will give a share price of $3.45. I would prefer at least a 10% MoS considering the entry of the 4th telco and the fierce competition ahead for the regional business, this results in a fair price of $3.10. At $3.10, 17c gives a yield of 5.5% with room for growth considering the 10% MoS allocated for this price. Any drop below this price to me is a fantastic opportunity to scoop up a mammoth blue chip giving a dividend of at least 5.5%.

Any growth driver should come from the acquisition of good businesses that can improve the top line of the company. There should still be enough ammunition for singtel to do that following the divestment of Netlink. However my personal thought is that management will need to be more aggressive on the digital life and enterprise business segment to generate a steady stream of income that can be comparable to their current traditional consumer business.