StarHub Ltd’s Share Price Is Down By 12% Over The Past Year: Here’s Why

StarHub Ltd (SGX: CC3) is one of Singapore’s three big telecommunications companies. Over the last 12 months, StarHub has seen its share price fall by 12%. Why could that be the case?

Reasons for declines

There are many reasons why a company’s share price could fall. But, the reasons can be classified as business-performance-related, or investor-sentiment-related.

The former deals with how a company’s business has performed or is expected to perform. And by business performance, one of the really important numbers would be the company’s profit.

Meanwhile, the latter is about the overall mood of market participants – are investors more greedy than fearful, more pessimistic than optimistic et cetera? In general, negative emotions (fear and pessimism) tend to drag down the prices of stocks while positive emotions (greed and optimism) tend to push up stock prices.

The specifics with StarHub

Coming back to StarHub, there are a few possible reasons that might have contributed to its share price decline. These reasons are related to either StarHub’s business performance, or investors’ sentiment.

For the former, let’s take a look at  StarHub’s results for the first nine months of 2016. The telco reported the following:

  • A 2.7% decline in total revenue to S$1.76 billion
  • A 1.4% decline in profit attributable to shareholders to S$287.4 million
  • A 17% increase in free cash flow to S$229.4 million
  • A 2.6% decline in its Mobile segment revenue to S$902.8 million, despite ending the third-quarter of 2016 with 2.275 million mobile customers, up 4.5% from a year ago
  • A 6.5% decline in Pay TV customers from 542,000 a year ago to 507,000.

As you can see, StarHub has experienced declines in many aspects of its business.

For the latter group, in StarHub’s earnings release for the second-quarter of 2016, the company had lowered its outlook for the whole year. In the first-quarter of 2016, StarHub had projected low single-digit revenue growth; the revised outlook called for 2016’s revenue to “be at about 2015’s level.” What’s more, Singapore’s telecommunications industry is awaiting the entrance of a fourth-player; having more telcos could mean stiffer competition for StarHub.

At StarHub’s current share price of $3.13, the company is trading at 14.4 times trailing earnings.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.