I used to write a fair bit on Starhub here, talking about its high gearing, paying more than net profit for dividends. Turns out a lot of people got so infatuated with it for its high divdends. Especially when the share price is like $2.00 to $3.00.
Probably pat themselves on the back for a job well done.
Its always the stock that could never go wrong. Ultimate dividend stock.
Tonight it announced its full year results. The ultimate dividend stock ends off with another 20 cent dividend. For the 4th year running.
On first glance, revenue is rather predictable. Having so many long term contracts built into their offerings provide shareholders a level of certainty in the free cash flow to pay dividends.
On a full year basis, we see Pay TV and Broadband weakening. Both of these segments are what Starhub was strongest at. Losing the BPL and intense competition not just from M1 and Singtel but also MyRepublic and Viewquest have erode broad band well.
The surprise here was that I thought tiered pricing and 4G would improve margins. We still have not seen the effect.
The saving grace have been at the expense side of things. Due to lower subsidies provided for handsets by almost all telcos, it has created some breathing space.
Still I believe the 3 telecoms have enjoyed a rather good time the past year posturing on the mobile front. That is the fattest pie. Should competition heat up, I doubt its fun for Starhub and M1.
Haven’t compile this for the past 2 years but decide to do this after a busy work day. Some figures that scream out to me was the free cash flow. It dipped below to 292 mil which is lower than the 340 mil it requires to pay the 20 cent dividend.
What’s the indication going forward? In the last line we have the Capex to Revenue ratio. The weakest free cash flow is also the years where it edges high up.
Starhub have given indication that capex will be 13% of revenue next year. So likely FCF is not going to improve anytime soon unless we see the beauty of tiered pricing coming into the picture.
If FCF is not going up, its going to be another 20 cent dividend next year. The ultimate dividend stock will likely stay at 20 cent for 5 years.
The enterprise value / operating cash flow now is nearly 13 times. Usually 8 is rather fair, 6 is cheap. You would have to be desperate to buy it at 13 times.
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