singtel 2007 - 2008 financial report analysis

Accounting for Managerial Decision

TABLE OF CONTENTS

1.0 INTRODUCTION -------------------------------------------------------------------- 2

2.0 INCOME STATEMENT ANALYSIS--------------------------------------------- 2

2.1 Horizontal analysis of income statement -------------------------------------------------- 2

2.2 Vertical analysis of income statement ----------------------------------------------------- 3

3.0 BALANCE SHEET ANALYSIS------------------------------------------------------

2.1 Horizontal analysis of balance sheet ------------------------------------------------------- 2

2.2 Vertical analysis of balance sheet -------------------------------------------------------- 3

4.0 CASH FLOW STATEMENT ANALYSIS------------------------------------------

5.0 RATIO ANALYSIS

5.1 Profitability ------------------------------------------------------------------------------------ 2

5.2 Liquidity --------------------------------------------------------------------------------------- 3

5.3 Financial gearing--------------------------------------------------------------------------------

5.4 Investment ratios --------------------------------------------------------------------------------

REFERENCES-----------------------------------------------------------------------------13

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1.0 INTRODUCTION

Singapore Telecommunications Limited, commonly abbreviated as SingTel, is Asia’s leading

communication group with operation and investment in more than 20 countries and territories

around the world. The group provides a diverse range of innovative communication services

including fixed, mobile and data communications, Internet, information technology (IT) and

consultancy, pay television and satellite.

Established in 1992, SingTel was listed on the Singapore Exchange in November 1993 and on

the Australian Stock Exchange in September 2001. SingTel has expanded aggressively outside

its home market and owns shares in many regional operators, including 100% of the second

largest Australian Telco, Optus, which was acquired in 2000 from Cable & Wireless and other

shareholders of Optus, and Bharti Airtel, the largest Telco in India.

Today, SingTel is the largest company listed on the Singapore Exchange in term of market

capitalization and is majority owned by Temasek Holdings.

Financial Years 2008 targets of SingTel group:

Revenue to growth at single-digit level.

Operational EBITDA (Earnings before interest, tax, depreciation, amortization) (exclude

strategic initiative) comparable to previous year.

Telecom margin at mid-40% level.

Overall EBITDA margin at 40%.

CAPEX (Capital expenditure) as 0% of revenue at low double digit level.

Free cash flow (exclude associated dividend) to decline slightly.

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2.0 INCOME STATEMENT ANALYSIS

2.1 Horizontal analysis of income statement

2008∆

ChangeYOY

Change % 2007

S$ Mil S$ Mil

Operating revenue 14,844.40 1,467.50 10.97% 13,376.90

Mobile communications 5,976.30 584.40 10.84% 5,391.90

Data and internet 3,057.00 406.80 15.35% 2,650.20

National telephone 2,267.30 -7.70 -0.34% 2,275.00Information technology and engineering 1,230.70 204.20 19.89% 1,026.50

Sale of equipment 1,086.40 209.80 23.93% 876.60

International telephone 786.60 -26.80 -3.29% 813.40

Pay television 180.60 35.20 24.21% 145.40

Others 259.50 61.60 31.13% 197.90

Operating expense -10,392.50 -1,180.40 12.81% -9,212.10

Traffic expenses -2,706.80 13.50 -0.50% -2,720.30

Selling and administrative costs -3,410.50 -587.00 20.79% -2,823.50

Staff costs -1,943.70 -221.00 12.83% -1,722.70

Equipment costs (Cost of Sales) -1,371.20 -273.30 24.89% -1,097.90

Repair and maintenance -229.00 54.60 -19.25% -283.60

Others -661.30 -97.20 17.23% -564.10

Operating expense (ex - Cost of Sales) -8,951.30 -837.10 10.32% -8,114.20

Other income 78.30 -38.60 -33.02% 116.90

0.00

Total Income 4,530.20 248.50 5.80% 4,281.70

Compensation from IDA - 337.00

Depreciation and amortization -1,886.90 -32.30 1.74% -1,854.60

Exceptional items -50.10 -235.10 -127.08% 185.00

Profit on operating activities 2,593.20 -355.90 -12.07% 2,949.10

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Share of result of associated and joint venture companies 2,066.50 528.80 34.39% 1,537.70

Profit before interest, investment income (net) and tax 4,659.70 172.90 3.85% 4,486.80

Interest and investment income (net) 216.20 128.90 147.65% 87.30

Finance costs -392.90 28.50 -6.76% -421.40

Profit before tax 4,483.00 330.30 7.95% 4,152.70

Tax expense -522.30 -148.90 39.88% -373.40

Profit after tax 3,960.70 181.40 4.80% 3,779.30

Attributable to -

Shareholders of the company 3,960.20 181.40 4.80% 3,778.80

Minority interest 0.50 0.00 0.00% 0.50

Earnings per share attributable to shareholders of the company

-basic(cents) 24.90 1.65 7.10% 23.25

-diluted (cents) 24.76 1.63 7.05% 23.13

Look at this table, we can clearly see that SingTel’s operating revenue increases by 1,467.50

(10.97%) between 2007 and 2008. The biggest contribution to this figure is Mobile

communications with an increase of 584.40 (10.84%), followed by Data and internet (406.80).

However, Sale of equipment soars the most by 23.93% between 2007 and 2008. In contrast,

decreases of 7.70 (-0.34%) in National telephone and of 26.80 (-3.29%) in International

telephone affect slightly total operating revenue. The reason could be Singaporean and foreigners

tend to use less telephone than mobile phone. Furthermore, comparing operating expenses in

2008 and 2007, there is an increase of 1,180.40. Besides, the rate of increase in operating

expenses (12.81%) is more than operating revenue (10.97%). In which, Selling and

administrative costs, Equipment costs contribute the most to operating expense. Especially, the

percentage of equipment costs rises more than equipment revenue (24.89% > 23.93%). This may

be because the company reduces the price to attract customers or changes the equipment mix that

the company sells more equipment which bring less profit margin. As a result, profit on

operating activities fall from 2,949.10 to 2,593.20. On the other hand, Interest and investment

income soars 147.65% that contributes to an increase in profit after tax (4.80%).

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2.2 Vertical analysis of income statement

2008 2007

S$ Mil % S$ Mil %

Operating revenue 14,844.40 100.00% 13,376.90 100.00%

Mobile communications 5,976.30 40.26% 5,391.90 40.31%

Data and internet 3,057.00 20.59% 2,650.20 19.81%

National telephone 2,267.30 15.27% 2,275.00 17.01%

Information technology and engineering 1,230.70 8.29% 1,026.50 7.67%

Sale of equipment 1,086.40 7.32% 876.60 6.55%

International telephone 786.60 5.30% 813.40 6.08%

Pay television 180.60 1.22% 145.40 1.09%

Others 259.50 1.75% 197.90 1.48%

Operating expense -10,392.50 -70.01% -9,212.10 -68.87%

Traffic expenses -2,706.80 -18.23% -2,720.30 -20.34%

Selling and administrative costs -3,410.50 -22.97% -2,823.50 -21.11%

Staff costs -1,943.70 -13.09% -1,722.70 -12.88%

Equipment costs (Cost of Sales) -1,371.20 -9.24% -1,097.90 -8.21%

Repair and maintenance -229.00 -1.54% -283.60 -2.12%

Others -661.30 -4.45% -564.10 -4.22%

Operating expense (ex - Cost of Sales) -8,951.30 -60.30% -8,114.20 -60.66%

Other income 78.30 0.53% 116.90 0.87%

Total Income 4,530.20 30.52% 4,281.70 32.01%

Compensation from IDA - 337.00 2.52%

Depreciation and amortization -1,886.90 -12.71% -1,854.60 -13.86%

Exceptional items -50.10 -0.34% 185.00 1.38%

Profit on operating activities 2,593.20 17.47% 2,949.10 22.05%Share of result of associated and joint venture companies 2,066.50 13.92% 1,537.70 11.50%Profit before interest, investment income (net) and tax 4,659.70 31.39% 4,486.80 33.54%

Interest and investment income (net) 216.20 1.46% 87.30 0.65%

Finance costs -392.90 -2.65% -421.40 -3.15%

Profit before tax 4,483.00 30.20% 4,152.70 31.04%

Tax expense -522.30 -3.52% -373.40 -2.79%

Profit after tax 3,960.70 26.68% 3,779.30 28.25%

3.0 BALANCE SHEET ANALYSIS

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3.1 Horizontal analysis of balance sheet

Balance sheets

Horizontal analysis of balance sheets 2008 2007

S$ Mil YOYChange

YOY Change (%) S$ Mil

Current assets Cash and cash equivalents 1,372.00 -18.10 -1.30% 1,390.10Trade and other receivables 2,540.90 81.60 3.32% 2,459.30Financial assists at fair value through profit or loss ("FVTPL investments") 11.00 -330.50 -96.78% 341.50Derivative financial instruments 2.50 -Inventories 123.60 30.20 32.33% 93.40

4,050.00 -234.30 -5.47% 4,284.30 Non-current assets

Property, plant and equipment 10,124.20 394.60 4.06% 9,729.60Intangible assets 10,056.50 -34.90 -0.35% 10,091.40Subsidiaries - -Associated companies 1,086.90 993.00 1057.51% 93.90Joint venture companies 7,453.00 375.50 5.31% 7,077.50Available-for-sale ("AFS") investments 352.60 310.20 731.60% 42.40Derivative financial instruments 358.00 166.40 86.85% 191.60Deferred tax assets 1,083.00 35.30 3.37% 1,047.70Other non-current receivables 150.10 50.00 49.95% 100.10

30,664.30 2,290.10 8.07% 28,374.20 Total assets 34,714.30 2,055.80 6.29% 32,658.50 Current liabilities

Trade and other payables 3,360.10 293.50 9.57% 3,066.60Provision 12.7 1.50 13.39% 11.2Current tax liabilities 345.80 2.40 0.70% 343.40Borrowing (unsecured) 1,874.30 1,678.00 854.81% 196.30Borrowing (secured) 0.30 -0.30 -50.00% 0.60Derivative financial instruments 162.50 144.70 812.92% 17.80

5,775.70 2,139.80 58.85% 3,635.90 Non-current liabilities

Borrowings (unsecured) 5,668.20 -603.00 -9.62% 6,271.20Borrowings (secured) - 0.30

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Advance billings 395.50 34.80 9.65% 360.70Deferred income 40.10 23.80 146.01% 16.30Derivative financial instruments 1,334.40 325.80 32.30% 1,008.60Deferred tax liabilities 329.50 14.10 4.47% 315.40Other non-current liabilities 188.60 -11.50 -5.75% 200.10

7,956.30 -216.30 -2.65% 8,172.60 Total liabilities 13,712.00 1,903.50 16.12% 11,808.50 Share capital and reserves Share capital 2,593.70 31.60 1.23% 2,562.10Reserves 18,405.80 120.70 0.66% 18,285.10 Equity attributable to shareholders of the company 20,999.50 152.30 0.73% 20,847.20Minority interests 2.80 2.80 Total equity 21,002.30 152.30 0.73% 20,850.00 Total liabilities and shareholders' equity 34,714.30 32,658.50

3.2 Vertical analysis of balance sheet

Vertical analysis of balance sheets2008 2007

S$ Mil % S$ Mil %Current assets

Cash and cash equivalents 1,372.00 3.95% 1,390.10 4.26%Trade and other receivables 2,540.90 7.32% 2,459.30 7.53%Financial assets at fair value through profit or loss ("FVTPL investments") 11.00 0.03% 341.50 1.05%Derivative financial instruments 2.50 0.01% - Inventories 123.60 0.36% 93.40 0.29%

4,050.00 11.67% 4,284.30 13.12%

Non-current assets

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Property, plant and equipment 10,124.20 29.16% 9,729.60 29.79%Intangible assets 10,056.50 28.97% 10,091.40 30.90%Subsidiaries - - Associated companies 1,086.90 3.13% 93.90 0.29%Joint venture companies 7,453.00 21.47% 7,077.50 21.67%Available-for-sale ("AFS") investments 352.60 1.02% 42.40 0.13%Derivative financial instruments 358.00 1.03% 191.60 0.59%Deferred tax assets 1,083.00 3.12% 1,047.70 3.21%Other non-current receivables 150.10 0.43% 100.10 0.31%

30,664.30 88.33% 28,374.20 86.88%

Total assets 34,714.30100.00

% 32,658.50 100.00%

Current liabilitiesTrade and other payables 3,360.10 9.68% 3,066.60 9.39%Provision 12.7 0.04% 11.2 0.03%Current tax liabilities 345.80 1.00% 343.40 1.05%Borrowing (unsecured) 1,874.30 5.40% 196.30 0.60%Borrowing (secured) 0.30 0.00% 0.60 0.00%Derivative financial instruments 162.50 0.47% 17.80 0.05%

5,775.70 16.64% 3,635.90 11.13%

Non-current liabilities Borrowings (unsecured) 5,668.20 16.33% 6,271.20 19.20%Borrowings (secured) - 0.30 0.00%Advance billings 395.50 1.14% 360.70 1.10%Deferred income 40.10 0.12% 16.30 0.05%Derivative financial instruments 1,334.40 3.84% 1,008.60 3.09%Deferred tax liabilities 329.50 0.95% 315.40 0.97%Other non-current liabilities 188.60 0.54% 200.10 0.61%

7,956.30 22.92% 8,172.60 25.02%

Total liabilities 13,712.00 39.50% 11,808.50 36.16%

Total equity 21,002.30 60.50% 20,850.00 63.84%Share capital and reserves

Share capital 2,593.70 7.47% 2,562.10 7.85%Reserves 18,405.80 53.02% 18,285.10 55.99%Equity attributable to shareholders of the company 20,999.50 60.49% 20,847.20 63.83%

Minority interests 2.80 0.01% 2.80 0.01%

Total liabilities and shareholders' equity 34,714.30100.00

% 32,658.50 100.00%

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4.0 CASH FLOW STATEMENT ANALYSIS

2008 2007S$ Mil S$ Mil

CASH FLOW FROM OPERATING ACTIVITIESProfit before tax 4483 4152.7

Adjustments for -Depreciation and amortization 1886.9 1854.6Exceptional items 50.1 -185IDA compensation - -337Interest and investment income (net) -216.2 -87.3Finance costs 392.9 421.4Share of results of associated and joint venture companies (post-tax) -2066.5 -1537.7Other non-cash items 52.6 48.9

99.8 177.9OPERATING CASH FLOW BEFORE WORKING CAPITAL CHANGES 4582.8 4330.6

CHANGE IN OPERATING ASSETS AND LIABILITIESTrade and other receivables -35.8 -260.9Trade and other payables 177.4 143.1Inventories -30.9 46.9Currency translation adjustments of subsidiaries -6.6 -6.8

CASH GENERATED FROM OPERATIONS 4686.9 4252.9

Payment to employees in cash under performance share plans -11.7 -5.5Dividends received from associated and joint venture companies 1113.5 672.7Income tax paid -335 -335.4

NET CASH INFLOW FROM OPERATING ACTIVITIES 5453.7 4584.7

CASH FLOWS FROM INVESTING ACTIVITIESDividends received from other investments 2.1 4.8Interest received 51.9 125.9Payment for acquisition of a subsidiary, net of cash acquired - -0.2Investment in associated and joint venture companies -1189.3 -3.3

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Long term loans repaid by joint venture companies 2.1 85.1Proceeds from sale of joint venture companies (net of withholding tax paid) 87.8 86.7Proceeds from capital reduction of joint venture companies 86.1 -Long term loans to joint venture companies - -0.1Investment in AFS investments -1.1 -1Proceeds from sale of AFS investments 1.3 12Proceeds from capital reduction of AFS investments 14 -Net sale proceeds from FVTPL investments 330.8 520Payment for purchase of property, plant and equipment -1879 -1789.8Advance payment for purchase of property, plant and equipment -75 -Proceeds from sale of property, plant and equipment 0.9 304.8Purchase of intangible assets -3.1 -2.9Withholding tax paid on intra-group interest income -177.7 -

NET CASH OUTFLOW FROM INVESTING ACTIVITIES -2788.2 -658

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from term loans 4927.7 1313.5Repayment of term loans -3748.7 -602.5Bonds repaid -12.2 -1329.4(Decrease)/Increase in finance lease liabilities -0.6 0.2Repayment of other borrowings - -5.8 Net proceeds from /(Repayment of) borrowings 1166.2 -624Settlement of swap for bonds repaid - -88.1Net interest paid on borrowings and sways -410.9 -412.6Dividends paid to minority shareholders -0.4 -0.3Final dividends paid to shareholders of the company -2544.7 -1336.4Interim dividends paid to shareholders of the company -890.7 -584.5Payment for cancellation of shares on capital reduction - -2271.6Proceed from issue of shares 31.6 59Purchase of performance shares -62.5 -51.5

NET CASH OUTFLOW FROM FINANCING ACTIVITIES -2711.4 -5310

Net decrease in cash and cash equivalents -5.9 -1383.3Exchange effects on cash and cash equivalents -12.2 3Cash and cash equivalents at beginning of year 1390 2770.3

CASH AND CASH EQUIVALENTS AT END OF YEAR 1371.9 1390

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5.0 RATIOS ANALYSIS

5.1 Profitability

Profitability 2008 2007 YOY change (%)

Gross profit margin 29.99% 31.13% -1.14%

Operating expense to sales 70.01% 68.87% 1.14%

Operating profit to sales 17.47% 22.05% -4.58%

Net profit margin 32.85% 34.19% -1.35%

5.1.1 Gross profit margin

This ratio expresses the gross profit as a percentage of total sales and indicates that how many

gross profits that SingTel can gain out of each sale revenue. We can clearly see that Gross profit

margin reduce slightly by 1.14% between 2007 and 2008. This is because the growth rate of

expense (12.8%) is more than the growth rate of revenue (10.9%). There are two factors leading

to this problem, the marketing strategies is not effective and the weakness of SingTel’s ability to

control expenses. However, the main reason could be the economic crisis and an increase in

competition in the market that makes many companies, even SingTel, met difficulties.

5.1.2 Operating expense to sales

This ratio illustrates that how many expenses that SingTel spent to earn $1 revenue. There is a

slight increase of 1.14% in operating expense to sales in there the selling and administrative cost

and staff cost soar by 17%. That explain why gross profit margin decreases softly. This could be

SingTel’s portfolio is plentiful; hence SingTel can met many difficulties with controlling

expenses.

5.1.3 Operating profit to sales

This ratio shows that how many operating profits that SingTel can earn out of each sale revenue.

It indicates a small drop of 4.58% in 2008 compare with 2007. This is the result of a rapid

increase in expenses and a steadily rise in revenues. This problem requires SingTel need to

improve control its expenses and innovate effective marketing strategies to create more market

share.

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5.1.4 Net profit margin

Net profit margin depicts the net profit as a percentage of total sales or how many net profits that

SingTel can get out of each sale revenue. A decline in gross profit margin (1.14%) together with

a decrease in operating profit to sales (4.58%) lead to a slump in net profit margin (1.35%).

However, a slump in net profit margin is less than a drop in operating profit to sales, it show that

SingTel have high income from associated and joint venture companies (20066.5m) and other

investments (4657.9m).

5.2 LIQUIDITY

Liquidity 2008 2007 YOY change

Current ratio 0.703 1.178 -0.474

Quick ratio 0.682 1.152 -0.470

0.021 0.025

5.2.1 Current ratio

This ratio expresses SingTel’s ability to meet day to day debts or with $1 current liability, there

are how many current assets are ready to pay. In 2008, current ratio is 0.7 < 1, that means if all

current liabilities become due, SingTel will not have enough current assets to pay. This shows

that SingTel has liquidity problem and an increased risk of failing to generate any future cash

flows. Moreover, there is a fall in current ratio of 0.474 between 2007 and 2008 that indicates

SingTel’s ability to pay short-term obligation is reducing. The reason is because the current

assets decline () while current liability soar in 2008, especially a huge increase of in unsecure

borrowing. This will affect SingTel’s ability to pay current debts and raise the risk for lenders.

5.2.2 Quick ratio

In fact, inventory cannot be converted in cash quickly. Therefore lenders tend to care more about

quick ratio that excludes inventory. We can clearly see that quick ratio in 2008 is 0.68 < 1.

SingTel’s liquidity problem is affirmed again. SingTel will not have ability to pay quickly if

current liability is due. Furthermore, there is a slight decrease of 0.4705 in quick ratio between

2007 and 2008. However, comparing current ratio and quick ratio in both 2007 and 2008, there

are slight differences of 0.025 and 0.021 respectively. This illustrates that SingTel keeps a small

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amount of inventory 123.6 (2008) and 93.4 (2007). This is a success of SingTel in controlling

inventory.

5.2.3 Working capital

Working capital is a measure of both a company’s efficiency and its current financial health.

Positive working capital indicates a company that has ability to pay off its short-term liabilities.

Negative working capital indicates a company that is unable to met day to day debts.

Working capital = current assets – current liabilities

2008 2007 YOY Change

Current assets 4,050.00 4,284.30 -234.30

Current liabilities 5,755.70 3,635.90 2,119.80

Working capital -1,705.70 648.40

It is clear to see that in 2008 SingTel has a negative working capital or working capital

deficiency (-1,705.70) because there is a drop of 234.30 in current assets while current liability

rise rapidly by 2,119.80 between 2007 and 2008, especially a big increase of 1678m in unsecure

borrowing. This depict the weakness of SingTel of working capital management and SingTel

may run into trouble paying back creditor in the short-term in the coming time.

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5.3 FINANCIAL GEARING

Ratios Formulas 2008 2007

Debt ratio (%) Total liabilities/Total assets*100 39.50 36.15

Equity ratio (%) Capital & reserves /Total assets*100 60.49 63.83

Debt equity ratio (%) Total liabilities/capital & reserves *100 65.29 56.64

5.3.1 Debt Ratio

Debt ratio is ratio that indicates what proportion of debt a company has relative to its assets. The

measure gives an idea to the leverage of the company along with the potential risks the company

faces in terms of its debt-load.

Dept to Asset ratio gives an idea to a company’s leverage along with the potential risks the

company faces in dept – load. The ratios indicate that the company’s dept has been lesser 50%

than its assets for both 2 financial years. Dept ratio has increased from 36.15% in 2007 to

39.50% in 2008, so the level of risk went up when company’s liabilities are concerned.

5.3.2 Equity Ratio

The Equity Ratio is a good indicator of the level of leverage used by a company. The Equity

ratio measures the proportion of the total assets that are financed by stockholders and not

creditors.

It also helps the shareholders to know how much they receive in event of company- liquidation.

For SingTel, The ratio has fallen in 2008 when compared to 2007; it is a good information for

shareholders. Company is using large amount of equity to support its business operations.

Obviously, the shareholders may be benefited in liquidity.

5.3.3 Debt Equity Ratio

The ratio helps in measuring the financial leverage of the company by taking in to consideration

its liability and shareholder’s equity.

Both the dept ratio and the dept equity ratio of SingTel have increased since 2007, the high

debt/equity ratio generally means that company has been aggressive in financing its growth with

debt. The debts are used to finance increased operations (high debt to equity), and company

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http://www.money-zine.com/Definitions/Investing-Dictionary/Leverage/


generated more earnings than it would have done. It is a good sign because SingTel has been

more effective in its plan in 2008 than that in 2007.

0

10

20

30

40

50

60

70

2008 2007

Gearing Ratio

Dept Ratio

Equity Ratio

Dept Equity Ratio

5.4 INVESTMENT ANALYSIS

Of prime concern to any investor is the return that they will receive from their investment in an

organization. Any return must be sufficient to reward the investor for the risk attached to that

investment.

Based on the SingTel’s financial statements for the financial year ended 31 March 2008, the

ratios have been calculated to assess the performance of SingTel in the 2008 financial year as

follow:

Name Formulae 2008 2007YOY

Change (%)

Dividend yield (%)Dividend per share/ Current market

share price

5.53

(*)

3.60

(**)53.36

Dividend per share

(cents)

Dividend announced for the year /

number of shares issue21.60 11.82 82.82

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Dividend payout

ratio (%)

Dividend announced for the year/

profit available to shareholders86.75 50.83 70.65

Dividend cover

(times)

Net profit available to shareholders /

Dividend announced for the year1.15 1.97 -41.40

Earnings per share

(EPS) - basic (cents)

Profit available to shareholders /

Number of shares in issue

24.90

(*)

23.25

(**)7.13

Earnings per

share(EPS) - diluted

(cents)

Profit available to shareholders /

Number of shares in issue24.82 23.13 7.28

Price/ Earnings (P/E)

Ratio (times)Current market share price / EPS 15.70 14.11 11.28

Return on capital

employed (ROCE)

(%)

(Profit before interest and taxation /

(Share capital+ reserves + long-term

loans))*100%

17.47 16.55 5.61

Note: * - Using share price as S$ 3.91 as on March 31st 2008

** - Using share price as S$ 3.28 as on March 30st 2007

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Look at the above chart; it is very easy to recognize that all the ratios of the 2008

financial year increased remarkably compared with the previous financial year, which implies a

good performance of SingTel Group in the 2008 financial year. Specifically, the dividend per

share in 2008 upped by 82.82 % to 21.60 cents per share and the earnings per share (basic) grew

from 23.25 cents per share (in 2007) to 24.9 cents per share ( in 2008), risen by 7.13%. These

increases reflected a significant increasing in net profit to S$3.96billion from S$3.78 billion, an

increase of 4.8 per cent from the previous year. Moreover, the return on capital employed

(ROCE) also raised from 16.55% to 17.47 % indicated the efficiency of using capital of the

Group. This effective investment gave investors a confidence in the success of company in the

future that expressed in the increasing in PE ratio from 14.11 to 15.7.

Reflecting the good result for the 2008 financial year, the SingTel’s share price rose 19

per cent on the Singapore Exchange (SGX) (from S$3.28 per share to S$3.91 per share) and 18

per cent on the Australian Securities Exchange (ASX) between April 2007 and March 2008.

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SingTel share performance – 1 April 2007 to 31 March 2008

(Compared to StarHub and M1)

(Source: Yahoo Finance)

In conclusion, it is clear that SingTel Group delivered a very strong set of results for the

financial year ended 31 March 2008. The group met all its targets against backdrop of highly

competitive market. Based on this good result, the investors can hope to see continued growth in

the market SingTel operate in next financial years.

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Price Earnings Ratios Analysis

The competitor of this company is named StarHub Limited. This table below shows the P/E ratio

of two companies and the comparison between these two companies in 2008.

Ratio Price/Earning based on financial statement(31 March 2008)

P/E

(times)

Change EPS (%)

07-08EPS(cents)

Basic Diluted Basic Diluted

StarHub Limited 14.10 2.35 2.05 18.28 18.16

SingTel 15.70 7.13 7.28 24.90 24.82

P/E: Price/Earning

EPS: Earnings per Share

The P/E ratio of a company indicates the market expectation towards the company. In

other words, a company who has a higher P/E ratio will be expected more rise in its

profits in the future than one who has lower P/E ratio.

SingTel has 1.6 times higher than StarHub Limited in term of P/E ratio (15.70 versus

14.10, respectively). It also means that investors are likely to want to invest in SingTel

because they sense that in the future SingTel may help them earn more money than

StarHub Limited.

Now we will analyze more by the comparison between SingTel and StarHub for the vertical

view:

Date Open High Low Close Volume Adj Close

SingTel 31/03/2008 3.95 3.96 3.9 3.9 86500 3.9

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StarHub 31/03/2008 3.1 3.1 3.02 3.04 2008000 3.04

SingTel StarHub ComparisonComparison to

StarHub (%)

Share Price (S$) 3.91 3.04 0.87 28.6

EPS (S$) 24.90 18.28 6.62 36.2

P/E Ratio 15.70 14.10 1.60 11.3

(Source: Yahoo Finance)

The result for such consistency is that SingTel had higher share price (28.6%),P/E

Ratio(11.3%) and higher EPS (36.2%) than its competitor, with 3.91S$ against 3.04 S$

for the former, 24.90 cents opposed to 18.28 cents for the second and 15.70 times

compared to 14.10 times for the latter. What makes SingTel has higher share price may

come from the expectation of investors regarding return on investment when they analyze

the cash flow statement of the two companies: (in millions of Singapore dollars, statics

from 2008)

SingTel StarHub

Operating Activities 2033 570

Investing Activities (1775) (219.7)

Financial Activities 4 (359.9)

From the table, investors can know that SingTel was successful and aggressive so make

much profit than StarHub. Moreover, SingTel’ investments in non-current assets roughly

eight times than StarHub’s ($1775 million against 219.7 million), thus having more

potential than StarHub in the future. From these reasons, investors tend to invest in more

profits making company like SingTel rather than StarHub.

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singtel 2007 - 2008 financial report analysis

Documents

income statement analysis

total income

balance sheet analysis

cash flow statement

tax tax expense profit

data communications

managerial decisionprofit

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