Starhub Limited (SGX:CC3) is the second largest telecommunication company in Singapore. It is listed on the Singapore Stock Exchange. The company is a listed subsidiary of Singapore Technologies Telemedia. In turn, Singapore Technologies Telemedia is a portfolio company of the country’s sovereign wealth fund, Temasek Holdings. In effect, Temasek Holdings has about a 56% stake in the telco.

The company is also one of the highest-yielding stock on the Singapore Exchange and one of the constituent stock of the Straits Times Index. It offers a dividend yield of about 5.8% for investors. That might be an attractive yield for most income investors. Is this company worth a look then? Here are the opportunities and risks that lie ahead for Starhub Limited.

Stock Information

1

TICKER SYMBOL: SGX:CC3

MARKET CAP: SGD 4.8 Billion (Updated 2nd May 2017)

SECTOR: Utility

INDUSTRY: Telecommunication

Here are 7 things you need to know about Starhub Limited.

The Business

Starhub offers a full range of telecommunication services in Singapore. Some of its main services include:

  • Pay TV
  • Mobile communication
  • Landline communication
  • Broadband services

The company has also ventured into other areas of services such as data centers and cloud computing. At the moment, its mobile segment is still the largest contributor, accounting for about 55% of its total service revenue in 2016. Even though Starhub only operates in Singapore, its mobile segment serves a customer base of more than 2.3 million accounts.

Key Opportunities

  1. All Things Digital

The whole global economy, including Singapore, is experiencing a switch now. We are seeing so much more possibility to improve our lives and efficiency in many sectors by using technology. As more and more disruptive technology and companies, such as Uber, Airbnb and Amazon, gain market shares, we might see traditional companies being replaced. However, one thing in common between all these new technological companies is that they require constant connectivity with its customers.

For infrastructure providers, such as Starhub, it would mean higher and higher demand for its services. The company is already experiencing a huge boom in demand for its internet services. As more industries adopt new technology in their business, the demand for Starhub’s service might increase as well.

  1. New Devices

Apart from companies adopting new technology, it seems the consumers are actively looking for new gadgets as well. Over the last few years, we have seen the rise of the Internet of Things, IoT. We now have smartphone, smart-watch, smart-camera, smart-refrigerator and even smart-cooker. It seems that any devices can be hooked up to the internet and give us data on how we can improve the efficiency in our lives. Thus, the consumer of the future might need many more data plans to enjoy all the different IoT that is being created today. The good news for Starhub is that all these devices would still require the services of Starhub to function.

Key Risks

  1. Limitation Of The Market

Unlike its larger competitor, Singapore Telecommunication Limited (SGX:Z74) ([stock_quote symbol=”SGX:Z74″ show=”name” nolink=”1″ class=”1″]), Starhub seems to want to remain as just a domestic telecommunication company. This might be because its parent, ST Telemedia, has already invested in foreign telcos, such as Lao Telecom and U Mobile (Malaysia), directly. The inability for Starhub to venture outside of Singapore might restrict its growth potential.

  1. New Entries To The Singapore Market

Some of the key segment of Starhub is under threat. Its Pay-TV segment is being affected after Streaming services such as Netflix started its operation in Singapore. Apart from that, the government has just approved a fourth Telco, TPG Telecom, to operate in Singapore. This could lead to higher competition in the future.

Valuation

Starhub Limited is trading around 14 times its earnings and offers a 7.2% dividend yield at the moment (May 2017).

Investor Relations

Investor Relation Material:

For Investor Relations related queries, please write to: ir@starhub.com or call

Jeannie Ong
Chief Strategic Partnership & IR Officer
Phone: +65 6825 5168

Eric Loh
AVP, Investor Relations
Phone: +65 6825 5171

Top Shareholders (31st Dec 2016)

  1. Temasek Holdings – 56.54%
  2. NTT Communications Corp – 9.92%

Financials

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The information provided is for general information purposes only and is not intended to be any investment or financial advice. All views and opinions articulated in the article were expressed in Stanley Lim’s personal capacity and do not in any way represent those of his employer and other related entities. Stanley Lim does not own any companies mentioned.

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