SINGAPORE Telecom is over-valued in stock market terms and needs to return to somewhere near earth before international investors are going to view the share with any enthusiasm. The same could be said of the stock market as a whole, where it appears stock valuations of strategically important stocks are measured and determined more by government dictate than market sentiment. While providing investors with a satisfactory set of results yesterday for the year ending March 31, analysts in Hong Kong and Singapore could not get excited about the 22.8 per cent operating profit rise to S$1.67 billion (about HK$8.4 billion), or the 19.5 per cent rise in net profit, before extraordinaries, to $1.2 billion. Analysts gave out a collective yawn after having proved themselves right. ''Boring,'' commented one young stockbroking researcher, after an upbeat report by Singapore Telecom chairman Koh Boon Hwee. More politely, Kay Hian James Capel analyst Yiang Sy Jian said there were no big surprises in the report. ''The news is not going to move the stock much,'' he said. On yesterday's results, the stock is on a price-earnings ratio of 45 times, which, given Hongkong Telecom's rating of 19 times for the same margin of growth, appears pretty rich. The current rating is well down on the 61 times rating it was planned to be listed at. Still data from Peregrine shows the rating well ahead of the overall market rating of 24 times. According to The Estimate Directory , the forecast profit growth in the 1995 financial year is for 16 per cent to $1.35 billion, placing the stock, given an earnings per share figure of 8.8 cents, of around 40 times prospective earnings, still very rich. The second largest company in Asia outside of Japan, Singapore Telecom was listed on the Singapore Stock Exchange in a blaze of glory on October 28 in a subscription that was four times over-subscribed, attracting funds of $7.43 billion. At around the current price of $3.56, its market capitalisation is roughly $58 billion, accounting for some 28 per cent of the total market main board capitalisation. A total of 587.48 million shares were added to the offering in different groupings taking the total to be listed to 1.68 billion, or 11 per cent of the company's issued share capital. The offer price was $3.60. It saw a high of $5 on its first day of trading. There were a number of reasons behind the process of listing the company on the exchange, some of which have been linked to the provision of Central Provident Fund financial cover for Singapore's population. The traditional reason for companies to come to a capital market such as a stock market is to tap these pools for cash. In the case of Singapore Telecom, it was not quite so straightforward, as the listing became the subject of almost blind national pride; to the detriment of fundamental pricing. Institutions are concerned at the high level of government holding still in the company, thus ensuring the authorities remain technically the largest stockholder in Singapore. The ritzy valuation of the stock is artificially high and will make further cash offerings seeking international investor participation difficult, and it will hinder investor enthusiasm for any future cash raisings given the alternative telecom choices around the region.
