Choosing the Right Share through Fundamental Analysis and Comparative Quantitative Analysis of the Figures

We have chosen SingTel, Starhub and MobileOne as companies for comparison.

COMPARING THE FIGURES

Let us apply the concepts.

Table 1 shows the ROE, ROA, PE, NAV and dividend yield of the 3 companies. 

• In comparison, StarHub has the highest ROE as it is highly leveraged with debt whereas MobileOne has the highest ROA. 
• In terms of PE and dividend yield, MobileOne offers an attractive PE of 10.1x and StarHub gives out the highest yield. 
• As service provider companies, all 3 telcos offer a NAV lower than their traded share price due to their low asset investment.

OUR PREFERRED CHOICE

Based on the findings, we would choose MobileOne as our preferred choice of investment. 

Mobile One

• MobileOne also has the lowest PE while giving out a healthy 5.5% dividend yield. 
• The low PE indicates that MobileOne’s share price can still rise higher to between 14-15x PE to catch up with its peers. 

StarHub

• StarHub may have the highest ROE but it depends too much on debt to fund its operations. 
• Even though StarHub offers a higher dividend yield, its PE shows downside risk as the share may slide to match its competitors.

SingTel

• SingTel’s dividend yield, ROE and ROA are the lowest among the 3 companies but it has the highest share capital and NAV. 
• High volume of transactions involving large number of shares are required for SingTel’s share price to appreciate. 
• SingTel is a good choice to invest in times of uncertainty due to its huge share capital and strong business foundation but its share price is the highest among the 3 telcos and could be an expensive choice to invest.

MobileOne, being the smallest player in the market, still has a lot to offer and would benefit the most from the Next Generation National Broadband project (NGN) as it would be provided with the necessary infrastructure to compete with the other big boys in the network industry once the project is completed. The high-barrier industry prevent others from jumping into the bandwagon and the expertise of MobileOne in the local market would encourage foreign partners to tie up with it.

CHOOSING THE RIGHT SHARE

Choosing a share to invest requires a lot of research on the background of the company and its potential to expand further. 

• Always compare companies from the same industry and in a similar business as you can never compare apples with oranges. 
• If you are looking for a share for long-term investment, always look for one with a stable dividend payout that adheres to your requirement. 
• Both fundamental and quantitative analysis are basic means to fully understand the potential of a company. 
• Remember to use the various forms of fundamental analysis before choosing your next rewarding share.

Read:

Understanding Fundamental Analysis (Part 4)

Understanding Fundamental Analysis