Skip to Content

Starhub and Singtel results inline

Starhub and Singtel both announced their Q3 and Q2 results respectively the past 2 days. For folks that are new to Investment Moats, analysis on the Singapore Telecom Stocks have been some of the more popular articles. [Analysis here, here, here and here ]

I won’t run through most of the fundamental numbers because telecom stocks provides results that does not deviate much from forecasts. And perhaps that is why we like about them.

As a summary here are my key take away on the 2 telecom results.


  1. Profit was 7.6% lower while revenue was 3.6% higher
  2. Debt on balance sheet is going down. Starhub have reduced debt since last year from 810 mil to 647 mil. This reduce their interest expense. Interest expense have always been low due to favorable interest rate Starhub enjoys. debt was a worry for people that don’t like Starhub, but to pay 647 mil, Starhub can pay it off with 1 year of their operating cash flow. This debt is a non issue and in fact looking to be the best among Singapore’s 3 telcos.
  3. Free cash flow for this quarter was 150 mil versus 80mil last year. This is enormous. 9 months free cash flow is 430 mil. Remember for Starhub to pay their 20cent dividend they need 340 mil. This means that 3 quarters of cash flow can more than pay their full year dividend.
  4. The main reason for better free cash flow is this years capital expenditure was substantially less. Capital expenditure is a double edge sword. If you spend on bad investments it is bad for share holders, if you don’t spend to replace or buy higher ROA assets, over a longer term it will be bad for Starhub competitively. Their capital expenditure is only 50% of their depreciation, will they lose their edge in the future?
  5. The yearly debt payoff is 300 mil. If they pay off the remaining debt in 2 years, we could see a big jack-up in dividends. A jack-up to 30 cent dividend is not a demanding expectation. But probably won’t be for the next 2 years.


  1. Net profit was down 1.2%, Revenue was up 3.9%, EBITDA was flat. Various subsidiary telecom companies cancelling out each other. Boring.
  2. Except for the Australian dollar, the other currencies are depreciating against the Sing dollar. This thus impacted the emerging market’s subsidiary telecoms.
  3. Operating cash flow this quarter was down 15% from last year. The main reason is a lower dividend received from emerging market telcos.
  4. Free cash flow was 900 mil. Unlike Starhub, depreciation almost equals capital expenditure. Singtel have always been growth focus and this done the right way is a good thing. However, in the past their investments have lower ROA then if they give back to share holders due to lower ROA then Singtel Singapore market. Remember that to pay out 16.8 cents dividend, Singtel needs around 2650 mil. They will be able to meet this with their cash flow.
  5. Singtel will only at most pay out 70% of earnings as dividends and based on projection that will only be 2515 mil, which can only pay 15.8 cents dividend. Long story short, don’t expect dividends to increase soon.
  6. Net debt is 6491 mil versus 4478 mil. Compare to Starhub, debt is climbing but still not a concern. Debt is good if it brings about good ROA. We are still not seeing it in their regional moves now.
  7. Bharti is still a problem child at the moment. That is all.


Overall, I see Starhub a one up over Singtel. The prospect based on figures definitely look better. The only caveat is whether they are not making enough capex.  I also see the prospect of Starhub raising dividends more likely then Singtel. Should my guess is right on the dividend paying capability, Starhub is a better buy right now.

I run a free Singapore Dividend Stock Tracker . It  contains Singapore’s top dividend stocks both blue chip and high yield stock that are great for high yield investing. Do follow my Dividend Stock Tracker which is updated nightly  here.


This site uses Akismet to reduce spam. Learn how your comment data is processed.


Sunday 13th of November 2011

Hi drizzt

I will keep accumulate starhub until their business fundamental deteriorate.

As iPhone user, we have what's app (free SMS), skype,viber & line for free voice call (provided connected to wifi),I believe their revenue will only rely on monthly subscription and international roaming. Pretty hard for telcos to make money in the era of smartphone.

I will only buy it once it drop to $2.80...


Friday 18th of November 2011

hi Gregg, i am glad we reached that understanding. there has to be some form of cannibalization. you won't pay 44 bucks for voice and sms when majority u use is data.

all it requires is the weakest party to cave in. the scenario will happen when M1 realise "hey no matter what i do i cannot get more customers from starhub and singtel!" they will play lower the margins game.


Sunday 13th of November 2011

hi dividends warrior, i was invested in Telefonica but not any more. yes i do bought it through NYSE as an ADR. it went down again but i suspect its because of a rather tough report on their competitive nature in spain. Let me evaluate. Its always on my watch list.

i am invested in Vodafone though. As UK do not have withholding tax i believe i can get the full 5.4% dividend yield. this year its special because they have included a special dividend after Verizon wirelss which vodafone own 45% of making the full yield 7.2%.

we hope verizon consistently distribute that (although they refuse to commit, much to the anger of vodafone shareholdrs) verizon wireless is the gem.

they are forecasting for the next 3 years to raise dividends by 7% per annum.


Sunday 13th of November 2011

hi Gregg,

i wouldn't say naive. i would say conservative. then again pardon my error as i think my estimation on their ability to pay down debt is over estimated. if their free cash flow is around 450 mil there is no way they can pay off 200 mil.

apologies to readers.

still gregg, would you buy it at this price?

Dividends Warrior

Sunday 13th of November 2011

Hi Drizzt,

Thanks for the analysis and update. Appreciate it.

Btw, are you still vested in Telefonica? Did you purchase the stock as an ADR from NYSE?

I am thinking of getting some.


Sunday 13th of November 2011

Hi drizzt

Great result for starhub. With the newly released 4S, I believe it is going to impact net profit with increasing of handset cost. The demand is so high that I have to queue four days to get 2 iPhone 4S (after office hours). LOL...

We have been monitoring starhub performance along the way,we have no doubt starhub ability of paying down the debt, if you look at all the analyst report, their FY12,Fy13 forecast always maintaining the same debt. Sometime I feel the analyst is very naive on this portion.

This site uses Akismet to reduce spam. Learn how your comment data is processed.