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Yield Watch:Starhub and M1 pushes ahead

My Dividend Stock Tracker have been updated with the daily figures. Market have rebound nicely and particularly the main darling have been Genting International.

Yangzijiang have also been on a healthy climb but what is slightly less under the radar was a shift in funds towards the telcos Starhub and M1.

Yields have fallen to 6.1% for M1 and Starhub at 8%. Those are still very good dividend yields. But are they undervalued now? I think not.

For sure they provide good yields but if you buy it at a high, your capital loss might end up greater than your dividends. EV/EBITDA  at 8.9 times and 6.7 times are low and probably shows how easy it is for telcos to clear their equity and debts.

Of Analysts predictions

What I want to mention about abit is that some analysts have upgraded Starhub these 2 days:

Starhub raised to Outperform by Daiwa, raised target by 22.1%

Daiwa upgrades Starhub (CC3.SG) to Outperform from Hold, raising target price to $2.65 from $2.17 after changing valuation basis to dividend discount model from discounted cashflow methodology, says Dow Jones.

Daiwa says telco offers attractive dividend yield, well positioned to gain market share in corporate broadband market with launch of Singapore’s high-speed national broadband network.

“Our analysis suggests that the opportunities in the corporate market will more than offset the risks the company faces in the residential segment,” says Daiwa, who expects revenue growth for mobile business to be driven by increasing number of data-plan users, higher demand for inbound roaming services.

What I find it funny is how come a month or 2 ago, this stock was deemed overvalued or fully valued and now it is deemed attractive. Could fundamentals have changed so much in 2 months? For a telco for the matter?

The article below points to possibly why there are active movements of late:

StarHub up on corporate business hopes

Singapore’s second-biggest telecom firm StarHub <STAR.SI> rose as much as 3.7% to a 22-month high on Wednesday on hopes the island’s new fibre-optic network may help the firm to get a bigger slice of the corporate data segment.
At around 11:00 a.m., StarHub’s shares were traded at $2.52 with over 2.9 million shares changing hands.
“With the roll out of the new network, we foresee StarHub making more headway in the corporate space as they will be able to sell more (data) services to schools, financial institutions etc.,” said Carey Wong, an investment analyst at OCBC Investment Research.
Singapore’s new fibre-optic network opened for business on Wednesday.

NBN isn’t new stories. Its been mentioned again and again so only now the public pays attention to this?

What we can learn from this is that while fundamental analysis does not always work in all stocks you analyse, but if you do it well and do a deep research on it way before the public got notice of it, you might be able to hit some good gains.

The downside is always:

  1. You thought you have a gem, turns out your skills are actually bad.
  2. The company screws you as it window dresses so well that you actually think you have a gem.
  3. It’s a gem but its value doesn’t get realised for years.

Investing sometimes is a funny game. You cannot say its hard, yet not many people make money consistently. For me, fundamental analysis is a necessary screen for all long term purchases but it isn’t the only deciding factor. Whether its fundamental or technical, if you don’t put work into it, it will screw you up more than it will help you.

I run a free Singapore Dividend Stock Tracker available for everyone’s perusal. 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.

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WealthBuch

Thursday 2nd of September 2010

Hi Drizzt,

some of the bank reports are my reverse indicators :)

I bought Starhub at a time where many of the banks were downgrading it, citing NBN and smartphones, as well as population increase as my reasons.

Anyway, to guard against downsides, what I would do is look for stocks in defensive sectors with decent dividend yields. I can wait for recovery while dividends continue to roll in.

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