We expect Singapore telcos to continue to outperform the STI in view of
an extended period of market risk aversion.
The sector offers robust free cash flows and the three telcos remain
below their targeted capital structures. This
is supportive of attractive yields of 4.5-10%. 2008 growth is expected
to be topline-driven on strong telco service
consumption. Margins are expected to be stable as competition
approaches a new equilibrium. In addition, we believe
concerns over risks from mobile number portability and the
Next-Generation Broadband Network are overdone. Maintain
Overweight with StarHub as our top pick, followed by SingTel and M1.
StarHub offers outstanding ARPU growth
potential with a robust yield of 10% while SingTel offers subscriber
share growth with a yield of 4.5%. M1 lacks
catalysts but offers a yield of 8%.
Quick Takes
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Trading Ideas
* STI Weekly Outlook
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