March 7, 2012

Singapore Telco

Kim Eng on 7 Mar 2012

Following the latest results season, we have downgraded our calls for M1 and SingTel, with margin challenges being the key pivot. Margins are likely to face downward pressure from the introduction of new handsets and mobile devices, with M1 the most vulnerable as it usually competes mainly on monthly tariffs and device subsidies. Apple, in particular, has been a bugbear given its regular launches of new phones. iPhone 4S, for instance, was launched in October last year and M1’s margins promptly took a beating in that quarter. This year, Apple is expected to introduce the iPad 3 (or rumoured to be renamed iPad HD) tonight, with Singapore availability possibly within 45 days, while iPhone 5 may come along in the third quarter, a year after the 4S. In the case of SingTel, its margins may take a further beating as it attempts to restructure its organisation to better face the data onslaught against its core voice business. However, StarHub stood out for its relative margin resilience; its mobile ARPU had in fact shown very encouraging growth. We expect this trend to continue, supported by the attractiveness of its hubbing proposition and restraint in going down the premium path to acquire customers.



SingTel (ST SP, $3.11)
Key levels
Resistance 2: $3.50
Resistance 1: $3.30
Support 1: $2.80
Support 2: $2.45
The stock has been moving sideways between $3.30 and $2.80. The overall trend is rather directionless in the weekly chart as defined by the 100- and 200-day EMA. A break of either the immediate support or resistance is needed to confirm that the stock is back into a directional trend.

StarHub (STH SP, $2.93)
Key levels
Resistance 2: $3.15
Resistance 1: $2.95
Support 1: $2.70
Support 2: $2.50
The stock has so far swung between $2.95 and $2.70 in a rather tight range. Candlesticks are trying hard to advance above the $2.95/3.00 level and a break above this area could mean more buying ahead. The $2.70 support level should attract buyers if the price pulls back. Momentum is still positive with RSI staying above the neutral level.

M1 (M1 SP, $2.48)
Key levels
Resistance 2: $2.90
Resistance 1: $2.70
Support 1: $2.30
Support 2: $2.00
The stock is falling from its peak of $2.70 (52-week high), signalling a brief pause of the bullish trend. Candlesticks are holding well above the key moving averages, suggesting the positive momentum is still intact. Watch the $2.30 (100-day EMA) support level as breaching below it would signal a possible trend reversal.

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