SingTel – Forming a Wedge

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SingTel is currently forming a Wedge pattern. The stock is not good for long term investing using “buy and hold” strategy because the chart is showing “lower high, lower low” pattern. However, it may be a nice candidate for short term trading where I can enter the trade near the wedge support and exit near the wedge resistance.

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StarHub – 5% price dropped after ex-Dividend. What next to SingTel?

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Starhub stock price dropped about 5% after ex-Dividend date on Nov 24. The stock price broke 20D and 50D MA support and looked very bearish. MACD is also showing Bearish Convergence and further down trend is expected. Next critical support is $1.83 which is very close to 52 weeks historical low of $1.76.

Base on this pattern, it is predicted that SingTel may go down to $2.75 (5% drop with reference to current $2.90 and if the stock price stays about this level) after ex-Dividend date on Dec 18. SingTel may go to bearish mode if $2.90 support is broken. This $2.90 is a very critical support where this is also the 20D MA, 50A MA and 61.8% Fibonacci Retracement Level. Last 5% price drop was observed after the ex-Dividend date on Aug 5. Would this pattern repeat on SingTel itself again?
 

Both charts look bearish and I am waiting for the stock price to hit bottom before buying for long term investment (for dividend collection).

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SingTel – Fundamental & Intrinsic Value

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Base on latest 2009 full year financial report:

  • PE = 14.9
  • Dividend Yield = 3.87%
  • NAV = $1.39
  • Net Earning = 23.1% (26.7% in 2008)
  • Current Ratio = 0.74 (Similar industry is 0.55) 
  • ROA = 10.4% (Base on 2009 Full Year)
  • ROE = 16.8% (base on 2009 Full Year)
 
 

Stock Background

  • Historical high = about $4.10
  • Current Price = $3.23
 
  
 
 
Intrinsic Value Calculation
PE Model
  • Fair value PE = 15, intrinsic value= $3.24 (base on EPS $0.21648)
  • EPS Growth Rate = 11.3%
  • PEG = 1.32  

DCF Model
 I use Free Cash Flow instead of Net Operating Cash Flow to calculate the intrinsic value. The reason is SingTel is a telecommunication company which need to continuously invest in the networking infrastructure to generate revenue and profit constantly. The intrinsic value is $2.45.

 

 

Discounted EPS Model

  • EPS Growth Rate = 11.3%
  • Discount Rate = 5%
  • 2009A EPS = $0.21648
  • Intrinsic Value = $3.02

Regardless of which method to calculate the intrinsic value, SingTel seems to at its fair value or over value (base on Free Cash Flow DCF Model). Furthermore, the stock price moves sideway for the past 10+ years. I will not buy SingTel unless the stock price falls below $2.50 and there is an increase in dividend yield in future.

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