Toward the end of 2019, I was seriously contemplating to invest in Singtel share using my SRS fund. Eventually, I opted to invest in OCBC instead. Obviously, the Indian Supreme Court’s hefty fine on its associate (Airtel) played a part in my investment decision. To contain the fall out, Singtel had to set aside a staggering provision of $1.93 billion (pre-tax) for the mind-boggling penalty. In the process, Singtel share price shattered like falling glass.
The massive provision resulted in Singtel recording its first ever quarterly loss ($674 million). The latest result also came on the back of an eighth consecutive quarter of declining profits/losses. Against this backdrop, Singtel share price corrected to $3.18 and only climbed back to $3.30 level recently.
Analysts had argued that the Airtel provision is likely to be ‘one-off’. To this, I do not disagree. But in my previous article, I have also highlighted that Singtel share price could be volatile due to its various legal disputes with foreign stakeholders. Apart from Airtel, the financial result also revealed that Singtel’s joint venture in Thailand, AIS, is locked in a legal dispute amounting to an estimated total of $7 billion.
It should also be highlighted that the Airtel liabilities only surfaced in the June 2019 financial report. Prior to that, investors had no inkling of this adverse court ruling coming Singtel’s way at all. Thus, for the case of AIS, I am inclined to fear the worst even though the management believes that the claims will be settled in favour of AIS. Given Singtel’ stake in AIS, the proportion of claim should be around $1.2 billion. In view of this, Singtel share price could be facing double trouble in the medium term.
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in Singtel before. Whether Singtel share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.
Singtel share price saved by big boys?
The massive fine meted by the Indian court had inflicted significant collateral damage to Singtel share price initially. Under normal circumstances, the amount of losses would have roiled the share price of any company to no end. But Singtel share price is different. Apart from the initial knee-jerk reactions, Singtel share price managed to recover lost ground for the couple of months.
Being the leading light of SGX, the reason for the resiliency of Singtel share price is due to the strong backing of Temasek Holdings and government. Currently, Temasek Holdings has stake of about 50% in Singtel while CPF Board holds 5%. Interestingly, despite the losses, the management did not launch any rescue mission for Singtel share price. The last share buyback was done in May 2019. And for the whole 2019, there were only two share buyback conducted.
Although the management had been sanguine about Singtel share price, institutional fund had [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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