Singapore’s three largest telecom operators have taken a drubbing recently. Whilst the Straits Times Index (SGX: ^STI) has shed 7% of its value from a high of 3,454 points, Singapore’s telecom companies have fared worse.
M1 (SGX: B2F), Singapore’s smallest quoted telecom provider has slipped almost 10% to $3.03. Meanwhile, the red giant, SingTel (SGX: Z74), is down 9% to $3.70 and StarHub (SGX: CC3) is off 8% to $4.08. Even though StarHub has fallen the least, an 8% drop is hardly insignificant. So what has happened to Singapore’s second-biggest telecom company?
After announcing first-quarter result last month, shares of StarHub shares slid 2% despite, what looked like, encouraging figures. The company posted a respectable 3% rise in net profit, which could suggest that the market might have been expecting a bigger improvement. To add salt to the wound, brokers gave the company a thumb’s down, which resulted in a further 4% decline in the share price later on.
It is important to bear in mind that share prices are fundamentally driven by demand and supply. In the case of StarHub a combination of investor disappointment and broker pessimism left the shares unloved. However, the thing to remember is that telecom operators enjoy high barriers to entry. After all, it is not easy to set up an entire network overnight. Consequently, StarHub’s position as one of the major telecom operators in Singapore is unlikely to be undermined. Additionally, it enjoys the largest share of Singapore’s subscription TV services.
At the current price of $4.05, StarHub shares are valued at around 19 times profit. They yield about 4.9%, which might just tempt income investors to take a second look.
Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.
Like us on Facebook to keep up-to-date with our latest news and articles. The Motley Fool’s purpose is to help the world invest, better.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Ivan Looi doesn’t own shares in any companies mentioned.