Why Has StarHub Ltd’s Stock Price Dropped By 20% In The Last 12 Months?

StarHub Ltd (SGX: CC3) is an easily recognisable company in Singapore, given that it’s our island nation’s second largest operational telco.

Over the last 12 months, StarHub’s stock price has fallen by 20% to S$2.30 currently. What may have caused this?

Reasons for a decline

There can be many reasons behind a stock’s price decline. But, the reasons can generally be classified as business-performance-related, or investor-sentiment-related.

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

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 case with StarHub

In StarHub’s case, I believe the former is the main culprit.

Here’s a table showing a condensed income statement for the company for the fourth quarters and whole of 2017 and 2016:

Source: StarHub earnings presentation

We can see that the company’s performance was quite ugly. Though revenue for 2017 was flat, net profit was down by 27%. Moreover, the telco’s dividend was cut by 20% to S$0.16 per share in the year. From 2010 to 2016, StarHub had maintained a good record of paying out an annual dividend of S$0.20 per share. The recent reduction in the company’s dividend may have prompted income-focused investors to reduce their stakes.

What’s next?

Going forward, the entry of TPG Telecom may increase the level of competition StarHub is facing. In late 2016, the Australia-based TPG Telecom was awarded Singapore’s fourth telco license. TPG Telecom announced last month that it expects to launch its service here in the second half of this year.

It will be interesting to see how StarJub is going to address the challenges ahead.

Motley Fool Singapore analysts have identified a technology mega-trend we believe investors simply should NOT ignore. Tech revolutions of this magnitude usually come along just once or twice in a lifetime, and the companies at the forefront could make a fortune. Click here now for our comprehensive research report laying out the full story… AND one Asian stock we think is poised to win.

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.