StarHub share price losing in telco war

It seems that StarHub share price had lost its way. The fierce telco war has walloped this counter left, right and centre. Since my last coverage on this counter, StarHub share price bottomed out to reach a low of $1.30 in October 2019. Subsequently, the stock went on a fine run to hit a high of $1.55 on 27 February 2020. However, the COVID-19 pandemic came along and sent Starhub share price plunging into the abyss yet again.

StarHub share price crashed into wall

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StarHub share price to face $282 million baptism of fire

StarHub share price

Indeed, investing in StarHub is no fun. This counter used to be the brightest star among the SGX stocks with its strong dividend track record and rising share price. As a matter of fact, StarHub share price was still trading at the $4.00 bandwidth in 2015. No one could have predicted that the entry of TPG Telecom in 2016 could change the destiny of StarHub so much.

In my point of view, StarHub share price is slightly undervalued at the moment. Assuming the full-year net profit is $160 million, the EPS should be $0.09. With a PE ratio of 16, the fair value of StarHub is estimated to be $1.44. At the point of writing, StarHub was trading at $1.38. Of course, for a growth stock, PE of 16 is considered to be conservative. The main concern is whether StarHub can hit $160 million of net profit for FY2020.

Net income for StarHub plunged from $372 million in FY2015 to an abysmal $186 million in FY2019. Against such backdrop, it is no wonder that StarHub share price suffers from a crisis of confidence among investors. Question now is: will a potential merger with M1 be a major catalyst for StarHub share price?

Recent market speculations of a purported merger with M1 had led the CEO to refute such possibility. Then again, it is not up to him to decide whether a merger with M1 is on the cards. Obviously, the ultimate decision maker will have to be the major shareholder – Temasek Holdings. Will StarHub share price see light at end of tunnel?

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in StarHub before. Whether StarHub share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

StarHub share price at cross-roads

Temasek Holdings must grab the bull by its horn. With M1 now privatized under the sovereign wealth fund’s stable, Temasek Holdings now faces the choice of injecting the asset into Singtel or StarHub. While Singtel can easily withstand the competition, the same cannot be said for StarHub. For the latter to have any reasonable chance of surviving the battle, a merger with M1 is inevitable. Otherwise, in the long-run. StarHub share price will continue to slide.

StarHub’s business is wholly based in Singapore and the root cause for the decline of StarHub is solely attributed to market saturation. Both the entry of TPG and MVNOs present formidable competition for StarHub.

Recent business update for first quarter must have confounded investors. Amid the circuit breaker, investors had expected StarHub to do well as Singaporeans are forced to work from home and businesses turn to technology for business continuity. But StarHub’s business [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: May 28, 2020 — 1:36 pm

2 Comments

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  1. Hi Gerald, I guess you are referring to acquisition. By definition, merger requires no cash to complete the deal, as two companies consolidate into one, though no idea how it can be realised in view of one being a public company while the other private.

  2. Hi Leo,

    Actually a merger can be funded through a mixture of cash and equity. But yes, in this case, I am referring more towards acquisition. To effect the acquisition, the major shareholders will have to agree and then EGM be convened for minority shareholders’ voting. I think the biggest fear is raising funds through rights, which will be highly dilutive to shareholders. This is the only viable option for StarHub to acquire M1.

    Regards,
    Gerald
    https://www.sgwealthbuilder.com

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