SINGAPORE: StarHub shares have leap 17% after span of 4 week on 27 Sep, from $1.62 to $1.90. Keppel and SPH have made a buyout offer for M1, StarHub shares are up 11 cents or 6.2% to close at $1.88 in the morning announcement.
StarHub Ltd is one of the three major telcos under blue chip stock segment Singapore. Since in the beginning of the year, StarHub’s shares have declined 33%, and generate extremely tough competitive environment for telcos in the local market.
The StarHub is one of the known undervalued stock of sgx index competitive landscape among StarHub’s EPS declined 34.8% since 2013, representing a –10.1% CAGR during the period and the net margin also possess the same challenging environment, losing 5.6ppts from a high of 16.0% in 2013.
From 2010 StarHub maintained its DPS at 20 cents for seven years. In September, StarHub made a JV with Temasek to set up Ensign InfoSecurity, a pure-play cybersecurity firm that will offer bespoke, end-to-end security solutions to enterprises and governments globally.
The latest hike of StarHub is now trading at 7.4x FY2018F EV/EBITDA, which is comparable to M1’s valuations based at $2.06 offer price by Keppel.
SingTel may provide a good risk/reward at this time given that it is offering a dividend yield of 5.6% for FY2019-20F, when StarHub offers a dividend yield of around 6.4% in FY2019-20F
The telcos speed-up their digital transformations and leverage on partnerships with strategic shareholders, valuations may see an upward re-rating over the next few quarters.
Risks include income contribution from new business segments not raise up fast enough to offset declining margins in their core businesses.
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