I am a Singtel shareholder and I think many of us here are as well. While our motivations for entry may vary, a fact of the matter is that Singtel has not made new highs since 2015. Based on my analysis of the charts, the long-term downward trend is clear and the odds are against those who think that a reversal is imminent.
Technicals aside, we are seeing some catalysts for growth that may not cause a rally but at the very least, may help to put a stop to the selling.
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Quick Thoughts about the Singtel’s Operating Environment
It is clear that Singtel lost significant market share (along with profits) in the years prior to Covid-19. They were giants at a time where a single SMS could cost almost $0.05. Price deflation caused by technological advancements have severely disrupted their entire business model. Today, paid services of the past cost little to nothing, some are even free.
Moving forward, Covid-19 has stressed the importance of network providers as more businesses seek to go digital during this period. If they play their cards right, Singtel is primed to gain from this as they are relying on their 5G capabilities and various diversified businesses to spearhead recovery.
Q1 FY 2022 Earnings
The recent earnings report by Singtel may very much be what they need to regain their standing in the market. With an outstanding net profit of $445million compared to a loss of $20million in the same period last year, I would consider this quite stellar. It has indeed showed me that there may be something brewing here.
Upon taking a closer look at their revenue, there are some revenue streams that investors should take note of as Singtel is now more than just a network provider.
Most of us would be familiar with their Singapore & Australia Consumer Segments as those are their core network businesses.
2 Key Business Segments that could drive SingTel’s future performance
However, I think we should take note of the following business segments going forward.
NCS
NCS was founded in 1981 when the Government of Singapore embarked upon initiatives to harness information technology (IT) for both the public and private sectors. It was restructured as a commercial entity in 1996 and a year later, became a wholly-owned subsidiary of SingTel Group.
The company offers several services including consultancy, development, integration, infrastructure management to customers.
AMOBEE
Amobee is a global marketing technology company serving the world’s leading brands and agencies. Amobee’s patented Brand Intelligence technology measures digital engagement to provide a deeper understanding of audiences, their mindset and interests.
Amobee’s 56% increase in revenue comes as no surprise to me given how the pandemic has been a positive catalyst for digital advertising firms. Even companies like Tradedesk Inc. (NASDAQ:TTD) have also seen their share prices rally during this period. Amongst all their business segments, I think that Amobee may be the one to deliver better results over others.
Do check out Zhi Rong’s article for a more in-depth analysis of SingTel’s fundamentals where he looked at their cashflow and profits in greater detail.
What my chart suggests about SingTel’s share price
Lower Highs and Lower Lows
Let’s face it, whatever the motivation, we all love Singtel because as investors we are never rational. Instead, we are emotional and we see Singtel as the company which helped Singapore to grow. Most investors took a position in this company (myself included) because we just like it.
However, if we look at the chart objectively, the long-term downtrend for the stock remains clear.
As you can see in the chart below, SingTel’s stock has been making a series of lower highs and lower lows, since 2015.
Traditionally, this is an indication of a stock which you would want to avoid at all costs as we (retail investors) are typically trend followers and not trendsetters. (Disclaimer: meme stocks are exceptions)
If we want to look at the possibility of any support levels forming or any reversal patterns which may be in motion, I would eliminate the “noise” and analyze the following weekly price action chart instead:
Here, we notice:
- Price breaking above 50 day SMA is not an indication to long the stock. Bear in mind that the overall trend is still bearish as both 50 and 200 SMA are sloping downwards. Furthermore, the distance between the price and the 200 day SMA shows the amount of weakness in this stock.
- Psychological support level at $2 is firm.
- Possible reverse head and shoulders forming with its low at $2, shoulder at $2.20 and neckline at $2.60.
If we see price breaking above the neckline at $2.60, there may be a possibility of a gold cross forming. I would take this as a bullish indication (with conviction) to long the stock.
On a more bearish note, if we see price revisiting $2.20, this would indicate the formation of a descending triangle adding further conviction to the bearish trend. Should this formation actualize, investors may wish to consider limiting their exposure to this counter.
Opportunities closer to Home – Catalyst in ASEAN
Singtel’s Digibank JV with Grab has yet to cause any significant (nor lasting) impact on its share price. Apart from that, other catalysts remain in ASEAN which have yet to deliver any material impact.
Moving forward, things may seem to be turning around for the company however until the charts show a stronger move to the upside, investors should wait before taking up a position.
If you are vested in the company and have been vested since its highs, do keep a close watch on how the technical formations shape up and from there, adjust your exposure accordingly.
