Singapore Telecommunications Ltd, Asia's fifth-largest phone company, may pay its investors a higher dividend for the current financial year after its bid for a stake in Pakistan Telecom was scuttled, analysts said. Last weekend, SingTel was outbid by Emirates Telecommunications Corp, which offered the highest price of $2.598 billion for a 26 percent management stake in state-owned Pakistan Telecommunication Co Ltd (PTCL).
SingTel had the third-highest bid of $1.166 billion, behind China Mobile (Hong Kong) Ltd, which offered $1.409 billion. "We see no more obvious big-ticket acquisition opportunities in SingTel's Asia-Pacific footprint focus," said analyst Anand Ramachandran of brokerage Citigroup Smith Barney. "Assuming this stays the case, we see a theme of dividend upside developing."
Analysts said they expected SingTel to pay 60-75 percent of its net attributable profit for the current financial year ending March 2006 in the form of dividends.
For the year ended March 2005, the company declared a total dividend of 13 Singapore cents per share - comprising an ordinary dividend of 8 cents per share and a special dividend of 5 cents a share.
This represented a payout ratio of about 66 percent of its net attributable profit, giving the stock a yield of about 4.8 percent, based on June 22, share price, analysts said.
SingTel said the March 2005 dividend payout amounted to about 40-45 percent of its pre-exceptional earnings.
HIGHER YIELD FROM M1?
JP Morgan Securities analyst Luis Hilado said in a recent client note he expects a dividend payout ratio of 75 percent for the year to March 2006, which translates to 14 cents a share.
OCBC Securities analyst Winston Liew is forecasting a payout ratio of 60 percent for the year to March 2006, which works out around 12 cents per share.
The payout ratio of 60-75 percent of net attributable profit expected by analysts gives SingTel stock a forecast yield of between 4.5 percent and 5.2 percent for the current financial year, based on Wednesday's stock price. This compares with a forecast yield of about 5.6 percent to 6.3 percent for rival MobileOne Ltd, analysts said.
M1, Singapore's third-largest cellular operator, has said it would maintain a dividend policy of paying out at least 70 percent of net profits for the year ending December 2005.
StarHub, the city-state's second-largest telecoms provider that achieved a maiden net profit in the March quarter, also plans a minimum annual dividend of 8 Singapore cents a share this year, giving the stock a yield of at least 5 percent.
"There's definitely dividend upside for SingTel after the failed Pakistan bid, but if investors really want a high-yield stock, they would go for M1 instead," said a telecoms analyst with a European brokerage house who declined to be named.
Facing a mature home market, where more than nine in 10 people own a cell phone, SingTel has spent about S$17 billion ($10 billion) in recent years buying operators in high-growth Asian nations with fewer cell phone users, and in the larger Australian market.
It now derives more than 70 percent of group revenues and two-thirds of pretax earnings from operations outside Singapore.
On Wednesday, SingTel shares rose 1.5 percent to a 3-month high of S$2.69. The stock has gained about 9.5 percent in the last 6 months, underperforming a 20.1 percent jump for M1 and a 54.1 percent surge for StarHub in the same period.