My Investment portfolio — Starhub

Current holdings — 16000 shares
Average price — — -1.55

January — 4000 shares (1.79 /share price in -> 1.87/share price out) Main reason for buying was due to interest in the recovery / re-branding exercise of Starhub. Main reason for selling in such a short time frame, was due to a sudden recovery just days prior to the quarterly report. This is 90% luck and 10% guess work.

Nevertheless I am still quite fond of Starhub and I’ll explain some key points to sort out my thoughts as I get ready for the share price plunge on 10th May due to the double ex Div which would have held the price steady for this month.

1- ) Declining Dividends (20cents/year to 16, to 9cents/year)

While most dividend growth investor shunned companies with declining dividends, I actually really favor this decision in this particular case.

Awarding share holders at the expense of the company is suicidal for the future prospect of the corporation. Telecommunications and the various project they’ve embarked on and should embark on, is a high Capex industry. Investment into R&D and future prospect should take precedents over returning to share holders. The reduction of dividends have finally brought it to a sustainable level in my view.

2-) Increased innovation and reinvention of company.

While most people know Starhub only for its mobile and cable TV services, little be known is that both Starhub, Singtel and M1 have been aggressively trying to wrestle for market dominance in the IOT space.

These range from products like the E-invoicing, Ensign + other IT security services, Multi industry rewards coalition programme and so on. Failing to innovate in modern day is like poison/ cancer. No company could stay at the top without taking risk in new venture and projects. Even Coke have to come up with new flavour and no sugar variation to cope with the changing market sentiments.

Telco have already taken a huge beating once, under-estimating the impact of apps like Whatsapp and facebook. The wake up call have been heeded in my view, and innovation is slowly picking up pace.

3-) Ensign losses and 1 off items.

Due to the new accounting policies, Starhub Hello change campaign, Ensign initial losses, the recent quarters have horrendous account books. However if one is to look at the underlying net profit, Starhub is actually doing pretty well.

While a company is still relatively profitable, it is very smart to invest in future capabilities and business arms. Although it is a joint venture between Starhub and Temasek, we should view of it as some sort of a start up, a typical 1–3years prior to seeing it take up speed should be expected.

We could draw a comparison to Singtel’s Group Digital Life. Which took some time to achieve profit making status. I would tell myself that it would be a 1–3years wait with starhub before we see the re-branding and innovation start taking its effect.

4-) On D) Profitability

As mention above, if we were to take out Ensign and investment for future capabilities, Starhub’s profit for the quarter is actually at 83.5 million, 4.9 million comparison YoY basis.

It should ease the mind of a long term investor that management would rather have a short term squeeze to prepare for the innovation of tomorrow.

5-) Government push for 5G

Despite various telco interest for 5G the capex requirement for it is too much for companies to digest at the moment. The spectrum bid that close just a few years back is still a major expense that Starhub is expecting to pay this year.

Most recent call for 5G bid have seen a move from traditional bidding wars and in my view is a big plus for telco players to move in together. 5G is a brand new territory with very limited applications at the moment.

I’m not exactly a tech guy but looking at some tech demos especially in the latency issue and how it affects AI / calibrations have amaze me at the possibilities 5G will bring. This is in-line with my 3years view. As we see the Autonomous Vehicle plan will further in 2022 and various 5G initiatives should likewise kick start into high gear in my guess.

Strategy going forward (Conclusion)

I have to remind myself and be mentally prepared for a short term drop in share price to as low as 1.4 or below. Should there be a sudden recovery without substantial change in the company fundamentals, I would look to offset part of this portfolio into other asset I’m holding onto.

Disclaimer, I AM not a certified financial adviser and this is purely my personal diary of having fun in the stock market. I’m just your artist next door.