A short mention of Starhub since it is one of my larger holdings. The Q1 result released on May 4 was not bad. You can view the presentation slides here & the full results here.
- EBITDA was consistent versus last year as well as last quarter. Q1 was traditionally a weaker quarter so result is not bad
- Free cash flow was weaker than last year but still inline as they have less contributed from net working capital. As such full year free cash flow should come up to 430 mil which is more than adequate to pay 340 mil for their 20 cent annual dividend
- As they need 85 mil each quarter to pay out the 5 cent dividend, they have more than adequate
- Capex is 7% of revenue which is lower than the targeted 11% outlined by StarHub. However we do see that starhub have a tendency to spend more in capex in the 4th quarter so I do expect total capex for the year to come in at 250 mil
- Neil Montefiore have indicated they are not likely to raise dividend. I believe they would rather maintain cash for initiatives or pay down debt
- Current dividend yield is 6.2%. EV/EBITDA is around 8-9 times. Safe by dividend stock standard but in terms of Telecom companies this is rather fair
- What we like about StarHub is its predictable cash flow and good yields even in down turns.
- When investing always look at competing stocks at the same yield, whether their business is more sturdy, whether they are cheaper. The best is that they beat starhub in all three metrics then they end up to be better investments. If starhub ends still better than them then perhaps waiting for may to Sep to see if there is a draw down in the market to get a better price for it.
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