Author: (The) Boring Investor

Breaking My Valuation & Position Limits

It is official! I have broken my valuation limits on buying & selling stocks and position limits on individual stocks! Previously, I mentioned in What is My Target Price? that I have valuation limits of 1.8 to 2.0 times book value for buying stocks and 3.5 to 4.0 times book value for selling them. In Jan this year, I had broken these rules with the purchase of M1 at 4.7 times book value and Singtel at 2.5 times book value! Also broken were my position limits on individual stocks. I have an initial position limit of $15K to $20K...

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I Didn’t Let My Alma Mater Down

How time flies. This is post no. 208, which makes it the 4th birthday for this weekly blog. This is a time for celebrations and reflections. Today’s story is about my studies in the Singapore Management University (SMU)’s Masters in Applied Finance (MAF) programme. I enrolled in the programme in Jul 2004. The stock market had just recovered from a 3-year slump due to the dot.com crash in 2000, Sep 11 terrorist attack in 2001, accounting scandals in 2002 and the Severe Acute Respiratory Syndrome (SARS) in 2003. After a prolonged slump, the market staged a strong recovery in...

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The Investigative Approach to Stock Investments

There are a couple of quantitative methods for analysing stocks, such as the Dividend Discount Model (DDM). A lot of people use them for stock analysis and investment as they are relatively simple to use and do not require qualitative analysis of the business strategies, competitive environment, corporate governance, etc. For a very long time, I was also a keen user of such methods, looking at only earnings, dividends, cashflows, debts, book value, etc. to identify value stocks. Such an approach has served me well in the past. However, there are times when this approach turned up value traps...

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Challenging Times Ahead for Starhub’s Dividends

When M1 announced its results in end Jan, I went to buy both M1 and Singtel, but I did not buy Starhub. The conventional wisdom is that between M1 and Starhub, Starhub would be better able to manage the competition from the fourth telco, as it has Pay TV, broadband and enterprise fixed services besides mobile services. That is true provided the other business segments are generating stable, recurrent cashflows. However, is that true? First of all, let us look at the revenue contribution from its 4 business segments.   Fig. 1: Starhub’s Service Revenue Breakdown Excluding equipment sales,...

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Is Pay TV Still A Reliable Cash Cow?

For the past 6 weeks, I have been blogging about the mobile services segment of telcos. It is time to move on to the next segment — Pay TV. I will analyse Pay TV using Starhub’s results, as Singtel has more business segments and operates in many countries. The figure below shows the no. of Pay TV subscriptions in FY2015 and FY2016. Starhub is kind enough to disclose its market penetration rate in its financial results, which allows me to work out the total size of the Pay TV market in Singapore. Fig. 1: Pay TV Subscriptions As shown...

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Telcos From A Consumer’s Point of View

In previous weeks, I have been blogging about telcos from an investor’s point of view. This week, the focus will be on a consumer’s point of view, which actually provides some useful insights into how telcos price their services. Telco charges (inclusive of handphone, mobile data, broadband and fixed line) have been one of the biggest bugbears for my monthly expenses. Part of the reasons is that the combination of lines have been fairly unsatisfactory. I have 2 handphones, 2 mobile data lines, 1 wired broadband and 1 digital home line. The other part of the reasons is that...

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Do Telco Investors Need to Fear the Fourth Telco?

Ever since the Government announced that they would allow the entry of a fourth telco, share prices of the 3 existing telcos have been on a down trend. In Dec 2016, the name of the fourth telco was made known; it would be TPG Telecom. Do investors of the 3 telcos need to fear the fourth telco?   Firstly, some background information about TPG. TPG is the second largest internet service provider and the largest mobile virtual network operator (MVNO) in Australia. As a MVNO, it is able to offer the full suite of mobile telco services such as...

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The Telco Landscape in Singapore

The telco regulator in Singapore, Infocomm Media Development Authority (IMDA), regularly publishes a list of facts & figures about the telco industry. It is interesting to look at the figures occasionally to understand the trends affecting telcos and review whether telcos worth investing. Mobile Services To investors of the 3 local telcos, the most important figure must be the no. of mobile subscriptions. Fig. 1 below shows the no. of subscribers according to type of network (3G/4G) and payment mode (pre-paid/ post-paid) for 2016 up to Nov. Fig. 1: Mobile Subscriptions From the figure, it should come as no...

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Can Telcos Stop the Decline in Profitability?

All 3 telcos have reported their financial results for the quarter ending Dec 2016. Both M1 and Starhub reported a significant drop in net profit of 27.1% and 33.2% respectively while Singtel reported a slight 1.8% rise in net profit. Starhub even dropped a bombshell by announcing that dividends for 2017 will be cut by 20% to 16 cents. Can telcos stop the decline in profits, or will profits continue to decline? As M1 is closest to a pure mobile telco company, this analysis is carried out using M1’s results.   Fig. 1 below shows the overall service revenue...

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Impact of Data Upsize Plans on Telcos

Competition among the 3 local telcos used to be fairly stale, until things started to heat up in Mar 2016 when all 3 telcos launched data upsize plans as a way to pre-empt competition from a potential fourth telco. The upsize plans provide subscribers with more data with the payment of an extra monthly fee. How does that impact the revenue and profitability of telcos? As M1 is closest to a pure mobile telco company, with 79% of its service revenue derived from mobile telco services, this analysis is carried out using M1’s results. Data X2 The table below...

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Impact of SIM-Only Plans on Telcos

I recently switched my telco subscription plan from the regular ones to SIM-only plans. How do these SIM-only plans impact the revenue and profitability of the 3 local telcos? Before we begin, let me explain what are SIM-only plans. As the name implies, SIM-only plans only provide voice, SMS and data but do not come with subsidised handphones. The tables below show the amount of voice, SMS and data for regular and SIM-only plans for M1, the telco which I subscribe to. The last table shows the difference in the amount of voice, SMS and data between the 2...

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A Prediction About Properties 13 Years Ago

Before I became a blogger in 2012, I contributed to the Straits Times (ST) Forum Page once in a blue moon. My first letter was written in Dec 2004 and discussed the issue of whether downgrading homes was a viable means of providing for retirement. I was 29 that year. Certainly, I was not thinking of retirement then, but what aroused my interest a few years earlier was whether properties could be a viable investment for me. That led me to study how the demographics of Singapore would change in the 35 years from the time I thought of...

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Another Year That Ends with 7

You probably have heard of the folklore — whenever the year ends with 7, the stock market would crash. In 1987, Dow Jones Industrial Average went through the Black Monday in which it crashed 22.6% in a single day on 19 Oct 1987. Stock markets worldwide followed suit. In 1997, Asia went through the Asian Financial Crisis which did not end until nearly 2 years later. The STI went from 2,216.79 on 31 Dec 1996 to 805.04 on 4 Sep 1998, which is a precipitious drop of 64%! Fig. 1 below shows the extent of the crash during that...

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Betting Against the STI Component Stock Changes

Buying and holding a stock index is considered as passive investing. However, the STI is not entirely passive. Every quarter, the STI would be reviewed to determine whether certain stocks should be dropped from or added to the index. This can be likened to active stock selection. How have the stock selections of STI of the past 3 years performed? Over the past 3 years, there have been 6 changes to the STI component stocks. 1 of them is a forced change, as CapitaMalls Asia (CMA) was privatised and its place in the STI was taken over by Ascendas...

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The Dogs and Puppies of STI for 2017

The Dogs and Puppies of STI is an annual blog series that I try to update at the start of every year. It can be very time-consuming to crunch all the data and analyse their performance relative to the STI, especially since there is only a very short time window between the end of the previous year and the start of trading in the new year. Nevertheless, I try to do my best every year. Here is the edition for 2017 and a review of the performance of the Dogs and Puppies of STI for 2016. To recap, the...

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