Analysis Of Singtel’s Performance And Corporate Governance Compliance

Trend on vertical and horizontal analysis regarding profits, sales, liabilities and assets

Singapore Telecommunication Limited known as Singtel is the biggest network operator for mobile in Singapore. It has 4.1 million subscribers and has more than 640 million customers with regard to subscriber base for mobile. The company has their head quarter in Singapore and it has more than 130 years of experience in operation. Further, it has invested in the leading companies all over Africa, Asia that includes Telkomsel, Bharti Airtel, Advance Info Service and Globe Telecom. Singtel is committed for delivering one stop, end to end ICT solutions for improving the business agility, driving growth and improve the profitability (Singtel.com 2018). Various products and services provided by the company are the mobile services,  cloud services, internet services, international roaming and calling, data connectivity, managed hosting and services, Singtel TV business, conferencing and telephony and cyber security. The company employs more than 25,000 employees. The turnover of the company that is the net income of the company is more than $ 3500 million for all the past 5 years and for the year ended 2017 its net income was $ 3,853 million. Top competitors for Singtel are Telstra Corporation Limited, Vodafone Group Public Limited Company and Hutchison Telecommunication (Australia) Limited.

Looking at the trend of Singtel, it is recognized that the sales revenue of the company are in decreasing trend as compared to the year 2012.  However, it went up in the year 2015 and again went down in the year 2016 (Delen, Kuzey and Uyar 2013). Whereas, the sales trend in Singapore telecommunication industry is in increasing trend for the last 5 years. The profit of the company through went down in 2013 as compared to 2012, after 2013 it is in increasing trend till the year 2016. However, the industry growth with regard to the profits was higher as compared to Singtel. On the other hand under the balance sheet the assets of the company are in increasing trend whereas the liabilities of the companies are in decreasing trend (Singtel.com 2018).

Profits of the company for last 5 years –

• 2012 – $ 3989.5 million
• 2013 – $ 3510.6 million
• 2014 – $ 3656.9 million
• 2015 – $ 3784.5 million
• 2016 – $ 3858.3 million

1. Economic condition

Entry of Colt in the Singapore Telco market was the biggest shakeup for the industry. TPG telecom became the 4^th telecom operator in Singapore in the year 2016 after 3 biggest companies like M1, Starhub and Singtel.  During the past 5 years the Telco industry grown at 14.7% rate which were influenced by upsurge in the output form in the manufacturing industry of the country (Weygandt, Kimmel and Kieso 2015). Along with the outstanding Telco market, the industry were able to build sophisticated telecom infrastructure and successfully promoted themselves for achieving excellence in telecommunication and over 20% of the homes installed 2 fixed line services.

1. Financial ratios for profit

Identification of profits

Singtel –

Ratio	Formula	2012	2013	2014	2015	2016
Gross profit ratio	Gross profit /sales	0.28	0.29	0.31	0.30	0.30
Net profit ratio	Net profit/sales	0.21	0.19	0.22	0.22	0.23
Return on Assets	Sales/Total assets	1.35	0.91	0.82	0.82	0.78
Operating ratio	Operating profit/sales	0.17	0.17	0.19	0.17	0.17

 

Ratio	2012	2013	2014	2015	2016
Gross profit ratio	0.30	0.31	0.30	0.29	0.27
Net profit ratio	0.14	0.16	0.17	0.20	0.20
Return on Assets	0.95	0.92	0.97	0.88	0.76
Operating ratio	0.20	0.20	0.21	0.19	0.18

1. Comment on profitability

From the above tables it can be identified that the gross profit ratio of the company is moving between 0.28 and 0.31 whereas the industry average for the same is moving between 0.27 and 0.31. Therefore, the gross profit ratio of the company is more or same with the industry average. On the other hand the net profit ratio of Singtel is high as compared to the industry average for the last 5 years. The net profit ratio of the company as well as the industry both are in increasing trend except the net profit of Singtel for the year 2013 that was in decreasing trend (Singtel.com 2018). Return on assets of Singtel for 2012 is significantly higher as compared to the industry and for the years from 2013 to 2016 the ratios were as per the industry average. Finally the operating ratios of the company for all the 5 years were lower as compared to the industry average. Therefore, the company shall control the operating expenses to achieve the operating ratio as per the industry average.  

1. Dividend ratio

For Singtel –

Ratio	Formula	2012	2013	2014	2015	2016
Dividend Yield ratio	Dividend per share/ Market value per share	5.37	5.42	4.49	5.21	4.52
Dividend payout ratio	Dividend /net income	1.03	0.72	0.73	0.71	0.72
Price earnings ratio	Market value per share/EPS	0.12	0.14	0.16	0.14	0.16
Earnings per share ratio	Net income/no. of shares	25.04	22.02	22.92	23.73	24.29

For competitor – Starhub

Ratio	2012	2013	2014	2015	2016
Dividend Yield ratio	0.14	0.13	0.14	0.19	0.15
Dividend payout ratio	0.79	0.90	0.76	0.99	0.89
Price earnings ratio	-2.11	0.02	0.07	0.08	-3.98
Earnings per share ratio	-11.05	8.07	8.05	1.06	-15.26

Looking at the dividend ratios of the company and its competitor Starhub it is identified that all the dividend related ratio of Singtel is significantly high as compared to its competitor Starhub (Singtel.com 2018). Moreover for the year 2012 and 2016 the P/E ratio and EPS of Starhub is in negative figures as the company could not earn the positive income for those years (Leary and Roberts 2014). Moreover, all the dividend related ratios of Singtel are stable and not fluctuated much in the last 5 years. Therefore, with the investment aspect, Singtel will be considered as better as it is paying regular and stable return on the shareholders investment (Starhub.com 2018).  

1. Short term and long term position

Looking at the financial report of Singtel if the short term position of the company is considered it is recognized that the company is in a good position to pay off its short term obligation efficiently (Baños-Caballero, García-Teruel and Martínez-Solano 2014). On the other hand, if the long term position is considered it is identified that the debt of the company is comparatively lower than the equity for all the last 5 years. Further, the company had sufficient earning to cover up the interest payment on the borrowings.  

1. Ratio calculation

For Singtel –

Ratio	Formula	2012	2013	2014	2015	2016
Debt to equity ratio	Total liability/ shareholder’s equity	0.41	0.25	0.22	0.20	0.19
Current ratio	Current assets / Current liabilities	1.20	1.13	1.38	1.61	1.78
Quick ratio	Current assets less inventory / current liabilities	1.18	1.12	1.37	1.60	1.76
Interest coverage ratio	EBIT / Interest expense	11.79	12.84	14.81	15.13	13.48

Ratio	2012	2013	2014	2015	2016
Debt to equity ratio	15.80	8.31	3.27	2.93	5.02
Current ratio	0.70	0.68	0.56	0.59	0.87
Quick ratio	0.54	0.63	0.53	0.36	0.59
Interest coverage ratio	22.57	24.79	21.18	25.73	16.66

 

If is identified from the above tables that the current ratio of Singtel for all the years are better than its competitor Starhub (Starhub.com 2018). Further, the current ratio of the company is revealing that it has sufficient short term assets to pay-off the short term obligations. Moreover the burden of debt on the company is significantly lower as compared to Starhub (Brigham and Ehrhardt 2013). However, the interest coverage ratio of Starhub is considerable better than Singtel. Therefore, Singtel must take the steps to increase its operating income to achieve better interest coverage ratio.

Industry average

Efficiency ratio –

For Singtel –

Ratio	Formula	2012	2013	2014	2015	2016
Asset turnover ratio	Net sales/Total assets	1.35	0.91	0.82	0.82	0.78
Inventory turnover ratio	Sales/ inventory	605.32	656.43	864.01	642.65	788.89
Current asset turnover ratio	Net sales/ current assets	6.60	7.07	6.21	6.67	5.39
Debtors turnover ratio	Net sales/ accounts receivable	7.35	7.66	6.52	7.05	5.60

For competitor – Starhub

Ratio	2012	2013	2014	2015	2016
Asset turnover ratio	1.37	1.29	1.24	1.25	1.17
Inventory turnover ratio	36.92	26.41	22.17	21.78	18.76
Current asset turnover ratio	3.12	2.86	2.70	2.71	2.65
Debtors turnover ratio	16.46	17.75	16.74	15.52	14.73

The asset turnover ratio for Singtel has been computed for the financial years of 2012 to 2016.  The asset turnover ratio reflects a decreasing trend. This means that the capacity of the company to derive returns or generate sales from its assets has decreased over the years. The asset turnover ratio of the competitors also signifies a decreasing trend indicating that Singtel has been performing at par with the industry standards (Weil, Schipper and Francis 2013). The inventory turnover ratio for Singtel represents a fluctuating trend where as the inventory turnover ratio of the industry reflects a decreasing trend over the years. This means that the capacity of the company to utilize its inventory has been much better as per industry standards. The current asset turnover ratio of Singtel represents greater ability of the company to derive returns from the sale of the current assets in comparison to the current asset turnover ratio of the industry. The debtors turnover ratio of Singtel represent a much higher rate than that of the competitor firm signifying the fact that the time cycle within which Singtel receives the due amount from its debtors is much more frequent compared to the competitor firm (Mohr 2017).

Singtel –

Ratio	Formula	2012	2013	2014	2015	2016
Return on investment	Net profit/investment	0.54	0.26	0.26	0.27	0.26
Return on asset	Sales/Total assets	1.35	0.91	0.82	0.82	0.78
Return on equity	Net income/shareholders equity	0.41	0.22	0.22	0.22	0.21

Ratio	2012	2013	2014	2015	2016
Return on investment	0.41	0.51	0.43	0.45	0.35
Return on asset	0.20	0.20	0.19	0.19	0.17
Return on equity	13.14	58.74	31.98	22.12	17.58

The return on asset represents the capability of a firm to derive optimum returns from the assets of the company. The return on assets for Singtel represents a uniform trend from the financial year of 2013. However, in the financial year of 2012 the return on assets represents an unprecedented higher value indicating that the company had been able to derive much higher returns in that particular year. The return on assets of the competitive firm reflect a decreasing trend indicating the fact that Singtel had been able to obtain more returns from its assets in comparison to the competitor firm (Jones and Godday 2015).

The return on investment for Singtel represents a stable graph except the financial year of 2012 that represents an abruptly higher value of 0.54. However, it can be evidently concluded from the financial data that the company had been deriving optimum returns from the investments in comparison to its competitor firm.

The return on equity represents the portion of the total profit that has been generated by utilizing the money that the shareholders have invested in business. The return on equity of the company has been poorer in comparison to the industry standards (Lundholm and Sloan 2013).

Identification of dividends

Net asset per share of the company for the year ended 31^st March 2016 is 157 cents.

Current market price of the share is 3.61

On the other hand, the market price of Strait Times Index (STI) is 3592.08

1 year’s range for Singtel share is 3.57 to 4.02. Therefore, the return = (4.02-3.57)/3.57 = 12.61%. on the other hand the 1 year range for Strait Times Index is 3,008.02 to 3,611.69. Therefore, the return is (3611.69-3008.02)/3008.02 = 20.07%. Thus, the return of Singtel share is not linear with STI and is considerable low as compared to the return of STI.

The non-financial parameter for Singtel that has been analyzed in this particular study are as follows:

SWOT Analysis

• Strengths – The strengths of Singtel can be identified from the market position it enjoys in Singapore. The entity is the market leader in the broadband and mobile markets in Singapore. It was one of the earlier companies to introduce nationwide 4G coverage with a network speed of up to 150 Mbps.
• Weaknesses – The Company had been acquiring companies, which turned out to be bad acquisition practices.
• Opportunities – Singtel can explore its opportunities in the international market segments.
• Threats – The particular threats that Singtel has been facing are the impacts that the regulatory changes may have on the business operations.

CSR activities

An instance of the CSR activities that have been conducted by the organization of Singtel is that the company gives a day of voluntary service leave per year to its employees for performing charity work (Jaber 2015).

Sustainable activity

A single sustainable activity that has been undertaken by the organization of Singtel is that Singtel has been a signatory of the UN Global Compact since the year of 2007 and has contributed significantly in the fields of labour, environment and human rights (Bull 2016).

The strengths of StarHub Limited are decreased costs related to labour. The weaknesses of the company include business operation in a highly competitive market and higher degree of investment in research and development. The opportunities of the company include growing demand and new good acquisitions. The threats of the company include technological problems, increasing costs and tax changes. An instance of the sustainability activities undertaken by the company is the promotion of sustained and economic growth of the company. A CSR activity of the company includes the maintenance of a fund for empowering the less privileged in Singapore (Heng 2014).

The acquisition that has been processed by Singtel, in the financial year of 2017 has been the acquisition of the ad tech company, Turn by Amobee, the ad tech division of Singtel for the particular value of $310 million. The particular acquisition facilitates the strengthening of the ad tech division of Singtel. The acquisition of Turn has helped the company in boosting its capabilities in regards to ad tech. The scope of ad tech had moved beyond mobile phones and the potential customer base of the company across Europe and North America has increased. Thus, the particular acquisition by Singtel has been beneficial for business (Business Insider, 2018).

Satiability and liquidity

A particular incident that resulted in criticism of the brand value of the company is that the publishing of the new advertisement slogan for the company, “Let’s make everyday better”. The company had undergone the process of rebranding in the financial year of 2017. The management of Singtel had introduced a new logo and the new slogan , “Let’s make everyday better”. However, the critics had pointed out a grammatical error in the slogan of the corporate entity. The particular grammatical error was that a “the” was missing before the word “everyday” in the slogan (Hicks and Hicks, 2018).

The directors of the company are Simon Israel, Chua Sock Koong, Venky Ganesan, Low Check Kian, Peter Mason Am, Cristina Ong, Peter Ong, Teo Swee Lian and Bobby Chin.

The directors of the company (executive) are as follows:

• Chua Sock Koong – She is an executive non-independent director of the company, and is a board member of Bharti Airtel Limited and Bharti Telecom Limited and subsidiaries of the Singtel group

The non-executive directors of the company are as follows:

• Simon Israel – He is a non-executive director and is the chairman of Singapore Post Limited.
• Venky Ganesan – He is a non-executive director and is one of the managing partners of Menlo Ventures.
• Low Check Kian – He is a non-executive director and is a director of Cluny Park Capital.
• Peter Mason Am – He is a non-executive director and is a chairman of AusNet Services Limited.
• Christina Ong – She is a non-executive director and is a co-chairman and senior partner of Allen and Gledhill LLP.
• Peter Ong – He is a non-executive director and is the head of Singapore’s Civil Service and Permanent Secretary
• Teo Swee Lian –  She is a non-executive director and independent director of AIA group Limited
• Bobby Chin – He is a non-executive director and is a member of the Council of Presidential Advisers

The strategic financial goal and vision of the company shall be to reduce the operating expenses to achieve higher level of income. Further, if the additional finance is required by the company it shall raise through debt instead of equity (Grinblatt and Titman 2016).  

Conclusion 

It is concluded from the above analysis and discussion that the net profit ratio and return on assets of Singtel is high as compared to the industry average for the last 5 years However, the operating ratios of the company for all the 5 years were lower as compared to the industry average. Therefore, the company shall control the operating expenses to achieve the operating ratio as per the industry average.  Further, the debt component of the company in the capital structure is significantly low as compared to the equity component. Therefore, if the additional finance is required by the company it shall raise through debt instead of equity to maintain the debt equity ratio.

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