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3 Things That Investors Should Know About StarHub Ltd Now

Credit: StarHub

StarHub Ltd (SGX: CC3) is one of the three companies in the telecommunication industry. The other two are Singapore Telecommunications Limited (SGX: Z74) and M1 Ltd (SGX: B2F). Starhub has five business segments and they are Mobile, Pay TV, Broadband, Fixed Network Services, and Handset Sales.

With that as a background, we will now look at three snippets about the company that investors should know about.

Diversification into Other Areas

Starhub, amidst the increasing challenges in the telecommunication sector, is diversifying into other areas that may have growth.

Recently, the company announced two pieces of news.

In the first one, Starhub will be investing S$15 million to subscribe to 26.3 million placement shares in MM2 Asia Ltd (SGX: 1B0). Upon completion of the transaction, Starhub will own close to 10% shares in the company.

Secondly, it has committed to acquire the remaining 49% stake in Accel Systems & Technologies, a cyber-security company. This will be completed in two stages – with the first 29.4% to be completed by this month and the remaining by 2020.

Recent Share Price Weakness

Starhub is one of the worst performing companies of the Straits Times Index (SGX: STI) in the last 12 months. Around a year back, its shares were trading at S$3.86 but on last Friday, they closed at S$2.70. This is not unexpected, given the increasingly challenging environment in the telecommunication sector.

To make matters worst, its management said during the 2016 fourth quarter earnings release that a quarterly dividend of four cents per share for 2017 will be given out. This represents a 20% reduction compared to 2016’s quarterly dividend of five cents per share.

A Silver Lining?

One thing that may be positive about Starhub is its above average dividend yield. Based on the latest price of $2.70 and an dividend per share of 16 cents, it translates to a yield of 5.8%. This compares favorably to the market average of around 3% at the moment.

Foolish Bottomline

Starhub is facing significant challenges that has resulted in a decline of its share price. Only time will tell if the diversification away from its traditional business will bear fruit.

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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.