StarHub Ltd (SGX: CC3) is one of the three listed companies in the Singapore telecommunication industry.
At the current price of S$1.66, StarHub’s stock price is 5% higher than its 52-week low of S$1.58. This raises a question: Is StarHub cheap now? This question is important because if the company’s shares are cheap, it might be a good opportunity for investors.
Unfortunately, there is no easy answer. However, we can still get some insight by comparing StarHub’s current valuations with the market’s valuation. The three valuation metrics I will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield.
I will be using the SPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).
StarHub currently has a PB ratio of 5.2, which is higher than the SPDR STI ETF’s PB ratio of 1.2. Similarly, its PE ratio is higher than that of the SPDR STI ETF’s (14.4 vs 11.4). On the other hand, its dividend yield of 8.4% is higher than the market’s yield of 3.6%. The higher a stock’s yield is, the lower is its valuation. Do note that StarHub has cut its dividend from the 2019 financial year, so the adjusted dividend yield would be much lower at 5.4%.
In sum, we can argue that StarHub is priced at a premium to the market average due to its high PB and PE ratios. Still, dividend investors might be attracted to the company due its high adjusted dividend yield.
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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.