Analysis of Financial Statements

Table of Contents

Sr.No. Contents
1. About the Company
2. Profitability of the company over the last two years
3. Liquidity and Working Capital Position
4. Gearing Ratio Analysis
5. Investor Ratios
6. Price Earning ratio analysis
7. Trend Analysis
8. Horizontal & Vertical Analysis
 About the Company
Singapore Telecommunications Limited (“SingTel”) is Asia’s leading communications group,
supported by more than 19,000 dedicated employees worldwide. Headquartered in Singapore,
they are a dynamic global player in the telecommunications industry with presence throughout
Asia, Middle East, Europe and North America.
In Singapore, SingTel is committed to leading and shaping the market by tapping 128 years of
operating experience and state-of-the-art infrastructure to provide a diverse range of innovative
communications solutions for consumers and businesses.
Optus, their wholly-owned subsidiary, is the challenger telecommunications provider in Australia.
SingTel Group has major investments in leading mobile operators in the region. The company
owns stakes – ranging from 21.4 per cent to 45.0 per cent – in AIS in Thailand, Bharti in India,
Globe in the Philippines, Pacific Bangladesh Telecom in Bangladesh and Telkomsel in Indonesia.
SingTel is Asia’s largest multi-market mobile operator, serving 124 million customers in seven
markets.
To stay ahead, SingTel continues to set the pace in telecommunications, shaping the markets by
introducing innovative and relevant services and solutions.
In the words of Singtel “We aim to be an integral part of the lives of our customers, enhancing the
way they live, work and play”.
 Profitability Ratio’s Analysis
(all figures in million dollars)
1.) Operating expenses to sales
Op.Exp. Sales Ratio Year
8986.3 13151.1 68.33117 2007
8783.3 13138.4 66.85213 2006

The ratio measures operating expenses as a percentage of sales. There has been a 1.5%
increase in the ratio as compared to the previous year. The percentage increase in sales is
0.09% whereas the percentage increase in operating expenses respectively is 2.3% thus
leading to a slightly higher operating ratio. The company should look into its operating
expenses and pinpoint areas for improvement to achieve a higher level of sales with a stable
or proportionately high operating expenses. These areas could include inventory, salaries etc.

2.) Operating profit to sales

Op.Profit Sales Ratio Year

2949.1 13151.1 22.42474 2007

3642.5 13138.4 27.72408 2006

This ratio measures the operating profits as a percentage of sales. The ratio shows us a 5%
drop in the operating profits though there has been a marginal increase in the sales. The
reason for this can be attributed to the rising operating expenses. Other factors that can be are
exceptional items. There has been a drastic drop of 630.5 from the previous year to this year
leading to a drop in the profits. Even though they are considered to be part of ordinary
business charges, exceptional items must be disclosed due to their sheer size or frequency.
Thus the company must look into this aspect.

3.) Net Profit Margin before tax

NPBT Sales Ratio Year
4152.7 13151.1 31.57683 2007
4499.3 13138.4 34.24542 2006

This ratio measures the NPBT as a percentage of sales. We see a 3% drop in net profit before
tax again largely attributable to the exceptional items. Another aspect is the drop of 49.7 in the
investment and interest income as compared to the previous year. We can suggest the
company look into this area as it is an additional income for the company.
 Liquidity & Working Capital Position
1.) Current Ratio
Ratio Year
0.32 2007
0.57 2006

Ratio measures company's ability to pay short-term obligations. The ratio has decreased i.e.
deteriorated through the years. There are two factors affecting the current ratio. There The
cash and cash equivalents have reduced in 2007 whereas the current liabilities have increased
causing the ratio to reduce. Thus, cash should be brought in the company from long term
borrowings e.g. Borrowings (unsecured) could be increased which has decreased in 2007 to
generate Cash to better Singtel's ability to maintain short-term obligations.

2.) Working Capital

WC Year
-3512.6 2007
-1302.5 2006

The working capital is the difference between the current assets and current liabilities. As we see
the figures the liquidity position has worsened from the previous year. Looking into the Balance
sheet we can see that
 Gearing Ratio Analysis
1) Debt to Asset Ratio: Total Liabilities/Total Assets*100

Debt to Asset ratio is one that describes a company's leverage and its level of risk by indicating
the relation between debt and assets.

Ratio Year
47.48 2007
37 2006

The ratios here show that the company's debt has been lesser than 50% of its assets for both the
financial years. The company displays low risk involvement when its liabilities are concerned. The
company's debt has increased in the financial year 2006/07.

2) Equity to Asset Ratio: Capital & Reserves/Total Assets*100

Equity/Asset ratio is often used as a measure of leverage.

Ratio Year
52.52 2007
63 2006

The ratio has decreased in 2007 when compared to 2006. The Total Assets and Reserves have
remained more or less constant. Total equity has decreased in 2007; most of it because of
reduction in share capital. The company has bought back shares.

3) Debt to Equity Ratio: Total Liabilities/Capital & Reserves*100

The ratio helps in measuring the financial leverage of the company by taking into consideration its
liability and share holder's equity.

Ratio Year
90.4 2007
58.72 2006

The ratio is much higher for the year 2007 in comparison with 2006.
There is a substantial difference in the two year's ratios owing to the following factors:
a) Trade and other payables (current liabilities) has increased by more than 100%
b) Total equity has reduced because of decrease in share capital.
The company has entered into a high leverage situation and is becoming aggressive in
financing its growth.
 Investment Ratio’s Analysis
1.) Return on owner’s equity
(Profit after tax*100/capitals and reserves)
Ratio Year
35.48 2007
31.41 2006

The share capital has decreased at a higher rate compared to PAT. This could mean that the
company made a buyback of shares last year thereby reducing the share capital. Scheduled 5
proves that they have bought back 829m shares worth Approx 2.2bSGD Also the buy back has
helped them positively influence the reduction in PAT

2.) Return on Capital Employed

(Profit before interest and tax*100/(capital & reserves+ long term liability)
Ratio Year
28.29 2007
22.73 2006

3.) Earning/share
(Post tax profit/ No of Shares)
Ratio Year
23.25 2007
24.98 2006

The number of shares has reduced but still the EPS is not improving. The clear reason is the
low PAT. This a point of grave concern for the company

4.) Interest cover

(Profit before interest& investment*100/interest expense)
Ratio Year
10.85 2007
10.24 2006
This ratio shows that the company is already a well off as the company’s profit is more than 10
times it interest that they pay. Though the increase is minimal the growth is towards the positive
side.
5.) Dividend yield
(Ordinary dividend per share *100/market price per share)

Ratio Year
4.14 2007
2.17 2006

Though has been almost a 100% increase in the dividend yield compared to the last year, the
value of 4.14 % is not encouraging for a share trader.

6.) Dividend Payout Ratio

Ratio Year
67.2 2007
46.19 2006

The dividend payout ratio has increased considerably. This shows that good amount of the
profits the company is making is being handed over to its share holders. But at the same time
the company must retain earning for future growth and expansion prospects.
 Efficiency Ratio’s Analysis
1) Debtors turnover times ratio

Ratio Year
8.90 2007
12.41 2006

This ratio compares the sales of a company to the revenue still to be collected from its debtors. It
should be as high as possible. The ratio has lowered significantly as compared to the previous
year & would need further investigation, though one of the reasons could be the seasonal effect.

2) Debtors turnover ratio days

Ratio Year
41 2007
29.39 2006

This ratio indicates the average days for which the company hasn't collected its dues from its
debtors. This ratio should be as low as possible. The company has done worse in this area but,
the reason could be attributed to seasonal effects.

3) Creditors turnover times ratio

Ratio Year
1.81 2007
4.03 2006

This ratio compares the level of sales with the payments due to creditors. It tells us to what extent
are sales being leveraged through payments outstanding to creditors. It should be low as possible.
The company has dramatically reduced the ratio.

4) Creditors turnover days ratio

Ratio Year
201.22 2007
90.36 2006
This ratio indicates the average days for which the creditors of the company are not paid. The
higher the ratio, the better it is for the company. The company has more than doubled the time for
which it delays payments to its creditors.

5) Stock turnover times ratio

Ratio Year
1426.39 2007
1171.10 2006

This ratio indicates the level of finished goods stock as compared to the level of sales recorded
through the year. It should be as high as possible. The company has improved on this front.

6) Stock turnover days ratio

Ratio Year
1426.39 2007
1171.10 2006

This ratio indicates the time for which the finished goods remain as stock. The lower this ratio the
better it is. The company has improved upon its previous year's performance

7) Sales on total assets ratio

Ratio Year
0.59 2007
0.58 2006

This ratio compares the sales to the total assets used to bring about those sales. It should be as
high as possible. The company has improved this ratio.

8) Sales on net assets ratio

Ratio Year
0.59 2007
0.58 2006

This ratio compares the sales achieved against the net assets of the company. This ratio again is
better if higher. The company has improved significantly on this front.
9) Fixed assets turnover times ratio

Ratio Year
0.64 2007
0.63 2006

This ratio gives an indication of how much the company is leveraging its sales on the back of its
fixed assets. The higher this ratio the better it is. The company has shown a marginal
improvement on this front.

10) Current assets turnover times ratio

Ratio Year
0.64 2007
0.63 2006

This ratio tells us the extent to which the company is leveraging its revenues through its current
assets. The higher this ratio the better it is. There is a fractional improvement in this ratio.
 Price Earning Ratio Analysis

Singtel
2006 EPS basic (cents) 24.98 Market price 2.62
2006 EPS diluted (cents) 24.88

Starhub
2006 EPS basic (cents) 17.60 Market price 2.16

PE ratio: Starhub: 2.16/0.1760 = 12.27 times (as of march 2006).

PE ratio: Singtel: 2.62/24.98 = 10.49 (as of march 2006).

In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to
companies with a lower P/E., thus Starhub investors a clearly expecting earnings growth in the future as
compared to Singtel investors.

The P/E is sometimes referred to as the "multiple", because it shows how much investors are willing to pay
per dollar of earnings. As we see Star Hub has a higher PR ratio as compared to Singtel which means that a
Starhub investor is willing to pay 12$ for 1$ of current earnings, whereas a Singtel investor is willing to pay
10$ for 1$ of current earnings.
 Trend Analysis
2005.00 2006.00 2007 2006 2007
Singtel's Sales i.e.
revenues from
business's own operation
has increased in 2006 as
compared to 2005 but
has dropped marginally
in 2007.Since the
change in 2007 is
just .10% the sale's
haven't changed much
Operating though the expenses
Revenue 12617.00 13138.40 13151.1 4.13 0.10 have increased.

The operating expenses

have been increasing
through the years, but
the increase in expenses
Operating has not been causing an
Expenses 8010.70 8783.30 8986.3 9.64 2.31 increase in the sales.
Operational
EBITDA 4661.80 4466.70 4281.7 -4.19 -4.14

The profit on Operating

activities for Singtel
increased in 2006 but
Singtel suffered a heavy
loss from operating
activities in 2007 hence
Profit on its core business is not
Operating generating any profits for
activities 2839.20 3642.50 2949.1 28.29 -19.04 them.
Profit before
interest,
investment
income and
tax 3784.40 4849.00 4486.8 28.13 -7.47
Profit before
Tax 3385.70 4499.30 4152.7 32.89 -7.70
Singtel's overall profit
after tax has also dipped
Profit After in 2007 as compared to
Tax 3268.60 4161.30 3779.3 27.31 -9.18 2006.
Portion of Singtel's profit
allocated to each
outstanding share of
common stock increased
largely in 2006 but
Earning Per dropped in 2007.Hence
Share 37.95 49.89 46.38 31.46 -7.04 probably Singtel's share
 price has also been
reducing in 2007.

Current
Assets 2176.60 1742.00 1671.9 -19.97 -4.02
Non-Current
Assets 21696.10 20994.40 20608.8 -3.23 -1.84
Assets also have been
decreasing through the
years leading to bigger
problems for Singtel
more so over by
decrease in current
assets as compared to
Total Assets 23872.70 22736.40 22280.70 -4.76 -2.00 non-current assets.
Current
Liabilities 2723.30 3044.50 5184.5 11.79 70.29
Non-Current
Liabilities 6368.00 5367.60 5394.4 -15.71 0.50
Liabilities decreased in
2005, but it increased
largely in 2006.The
increase in liabilities is
more over due to
increase in its current
liabilities i.e the company
is not undertaking its
Total collection cycles
Liabilities 9091.30 8412.10 10578.90 -7.47 25.76 efficiently.
Singtel's assets over
liabilities have been
decreasing over the
period which is not a
good signal for the
Net Assets 14781.40 14324.30 11701.80 -3.09 -18.31 company solvency.

By 2006 Singtel
increased its share
capital by issuing shares
in return of cash and
other considerations.
The share capital is
either common or
preferred shares. By
2007 it has reduced its
share capital by buying
back shares. On the
whole, from 2006 to
2007 it has increased its
Share Capital 2496.20 4774.70 2562.1 91.28 -46.34 share capital.
 The reserves of Singtel
reduced in 2005, this can
be attributed to the fact
that Singtel distributed
larger portion of its profit
in form of dividend rather
than retaining it as its
reserves fro future
investments to give
better returns to its future
in form of dividends. In
2006, the reserves
increased largely, as
Singtel retained most of
its profit rather than
passing it to its investors
Reserves 12285.20 9549.20 18285.1 -22.27 91.48 in form of dividends.
The net worth of Singtel,
i.e its assets over
liabilities decreased in
2005 but by 2007 it
increased its net worth
hence shareholder's
equity increased through
Net Worth 14781.40 14323.90 20847.20 -3.10 45.54 the years.
Singtel has reduced its
operational efficiency
through the years and its
short-term financial
health has been
deteriorating too. This
can be attributed to the
slow collection process
that Singtel may be
following and Singtel is
unable to meet its short
term liabilities with its
current assets. Company
should increase its
current assets i.e cash
and cash equivalents
and others and also
improve on its collection
cycle to reduce its
current liabilities to
Working create a positive working
Capital -546.70 -1302.50 -3512.60 138.25 169.68 capital.
 Horizontal & Vertical Analysis

Horizontal Analysis of Balance Sheet

2007 Changes 2006

%
Value
Change

Cash & Cash

188.5 -481.3 -71.8573 669.8
Equivalents

Trade & Other

1,477.10 419 39.59928 1,058.10
Receivables

Inventories 6.3 -1.2 -16 7.5

The current assets

heve gone down. The
primary reason is the
decrease in cash &
Current Asset 1,671.90 -70.1 -4.02411 1,742.00
its equivalents. The
money could've been
used to liquidate
liabilities.

Property ,Plant &

1,970.90 -237.8 -10.7665 2,208.70
Equipment

Intangible Assets 3.3 -0.3 -8.33333 3.6

Associated
24.7 0 0 24.7
Companies

Joint Venture
49.1 -7 -12.4777 56.1
Companies

Available for Sale

33.3 -10 -23.0947 43.3
Investments

Derivative
Finanacial 191.6 -47.6 -19.8997 239.2
Instruments

Other non-current 16.9 -9.3 -35.4962 26.2

 receivables

Total Non - Current

20,608.80 -385.2 -1.83481 20,994.00
Assets

The total assets have

gone down by 2% ,
the primary reason
for which can be
Total Assets 22,280.70 -455.3 -2.00255 22,736.00 attributed as the
decrease in total non
- current assets,
property, plant &
equipment.

Trade & Other

4,954.10 2779.6 127.8271 2,174.50
Payables

Current Tax
343.4 -16.6 -4.61111 360
Liabilities

Derivative Financial
5 -67.8 -93.1319 72.8
Instruments

The current liabilities

have increased
Total Current dramatically because
5,184.50 2140 70.29069 3,044.50
Liabilities of a major increment
in trade & other
payables.

Borrowing
4,397.00 -183.7 -4.0103 4,580.70
(Secured)

Deferred income 13.1 4.1 45.55556 9

Derivative Financial
736 262 55.27426 474
Instruments

Deferred Tax
231.3 -51.6 -18.2397 282.9
Liabilties

Other Non -
17 -4 -19.0476 21
Current Liabilities

Total Non- Current

5,394.40 26.8 0.499292 5,367.60
Liabilities
 The company has
borrowed a lot of
money through
Total Liabilties 10,578.90 2166.8 25.75813 8,412.10 derivative financial
instruments.Hence
the increase in the
total liabilities.

The company has

considerably shed its
Net Assets 11,701.80 -2622.1 -18.3058 14,323.90 assets.The money
has been used to
liquidate liabilties.

Share capital 2562.1 -2212.6 -46.3401 4774.7

Reserves 9,139.70 -409.5 -4.28832 9,549.20

Total Equity 11,701.80 -2622.1 -18.3058 14,323.90

Net Current
-3,512.60 -2210.1 169.6814 -1,302.50
Liabilities

Vertical Analysis of Balance Sheet

Percenntage 2007 2006 Percentage Analysis

Cash & Cash Equivalents 0.846023689 188.5 669.8 2.94598874

Trade & Other Receivables 6.629504459 1,477.10 1,058.10 4.65385292

Inventories 0.028275593 6.3 7.5 0.032987333

 The company has
maintained the %
Current Asset 7.50380374 1,671.90 1,742.00 7.661857847 component of
current assets in
its total assets.

Property ,Plant &

8.84577235 1,970.90 2,208.70 9.714549613
Equipment

Intangible Assets 0.014811025 3.3 3.6 0.01583392

Subsidiaries 82.21914033 18,319.00 18,392.20 80.89461647

Associated Companies 0.110858276 24.7 24.7 0.108638283

Joint Venture Companies 0.220370096 49.1 56.1 0.24674525

Available for Sale

0.149456705 33.3 43.3 0.190446868
Investments

Derivative Finanacial
0.859937076 191.6 239.2 1.052076003
Instruments

Other non-current
0.0758504 16.9 26.2 0.115235749
receivables

Total Non - Current Assets 92.49619626 20,608.80 20,994.00 92.33814215

Total Assets 100 22,280.70 22,736.00 100

The trade & other

payables have
increased by
more than 12%. It
Trade & Other Payables 22.23493876 4,954.10 2,174.50 9.564127375
reflects poorly on
the company's
ability to pay its
creditors.

Current Tax Liabilities 1.011637875 225.4 232.9 1.024366643

Derivative Financial
0.022440947 5 72.8 0.320197044
Instruments
 The total current
liabilities have
Total Current Liabilities 23.26901758 5,184.50 3,044.50 13.39065799 gone up by 10%
as compared to
the total assets.

Borrowings ( Unsecured ) 19.73456848 4,397.00 4,580.70 20.14734342

Deferred income 0.05879528 13.1 9 0.039584799

Derivative Financial
3.303307347 736 474 2.084799437
Instruments

Deferred Tax Liabilties 1.038118192 231.3 282.9 1.244282196

Other Non - Current

0.076299219 17 21 0.092364532
Liabilities

Total Non- Current

24.21108852 5,394.40 5,367.60 23.60837438
Liabilities

The total liabilities

Total Liabilties 47.4801061 10,578.90 8,412.10 36.99903237 have increased by
11%

The net assets

Net Assets 52.5198939 11,701.80 14,323.90 63.00096763 have gone down
by 11%

Share capital 11.49918988 2,562.10 4774.7 21.00061576

Reserves 41.02070402 9,139.70 9,549.20 42.00035186

Interest of Share Holders 52.5198939 11,701.80 14,323.90 63.00096763

Total Equity 52.5198939 11,701.80 14,323.90 63.00096763

Net Current Asset -15.7652138 -3,512.60 -1,302.50 -5.72880014