SINGAPORE (Mar 12): Investors should not catch a falling knife by buying TPG before it launches its mobile services, says UOB KayHian.

In a Monday report, analyst Jonathan Koh expects telco share prices to bottom two months after TPG’s launch, but will rebound in the third month.

As a case study, Koh recalls the year 2000 when StarHub launched its mobile services with a 3G network.

Over two weeks, 15,000 Singaporeans participated in its mobile trial. They were provided with free usage of a mobile phone and free local calls during the trial.

Pre-registration for the mobile trial started on Jan 26, 2000. At that time, StarHub captured the attention of consumers as it introduced innovative new features, such as “per second billing”, “free incoming calls” and “airtime rollover”.

Three months before StarHub’s launch, Singtel’s share price dropped 29%, but later recovered 3.7% during the three months after StarHub’s launch.

“Thus, the best time to bottom fish in the telco sector would be the second month after TPG’s launch,” says Koh.

As such, UOB is maintaining its “market weight” rating on the telco sector in Singapore.

For yield-oriented investors, Koh recommends NetLink NBN Trust which it has kept at a “buy” with a target price of 93 cents as it stands to benefit from TPG’s entry.

UOB also likes Singtel given overseas operations in 9M18 accounted for 63% of group pre-tax profits, as compared to 25% in 2000.

As at 11.50am, shares in Singtel and NetLink NBN are trading at $3.39 and 82 cents.

Singtel is trading at 14.4 times FY18 earnings with a dividend yield of 5.1%, while NetLink NBN is trading at 44.9 times FY18 earnings with a dividend yield of 5.9%.