StarHub Takes Double Hit in FY16

StarHub Logo

Few months back, Netflix announced its entry into Singapore. This has impacted StarHub and Singtel as both are in the Pay TV business.

Recently, there has been news that StarHub will stop eight of its FOX channels as renewal negotiations between FOX and StarHub cannot be reached.

Currently, StarHub makes up 3% of my stock portfolio. It has been providing good dividend and growth over the years. Based on 1 month stock chart, the price of StarHub has plunged 10.57%.

StarHub Q2 Stock Price

We know that revenue for StarHub is subscription based. That means, the larger customer base or market share it has, the more revenue as each customer pays a subscription for the services StarHub offer.

Let us look at StarHub 2Q2016 results to check if StarHub is losing customers or getting more customers.

Mobile

Customers for the Mobile segment increased by 73K. This still seems to be StarHub strongest business segment.

StarHub Q2 Mobile Customers

Broadband

Customers for Broadband decreased by 2K.

StarHub Q2 Broadband Customers

Pay TV

Customers for Pay TV decreased by 27K. From the chart below, we can see that StarHub has been losing customers for its Pay TV segment over the quarters. With the lost of its FOX channels and stiff competition from NetFlix, I am expecting the Pay TV segment to continue losing it customers.

StarHub Q2 Pay TV Customers

First Hit from Entry of Netflix

Not sure if the lost of StarHub customers is due to Netflix but I am sure it will have some impact on the SingTel and StarHub on their Pay TV businesses.

The price says all. Look at how competitive the price is.

NetFlix Plans

Second Hit from Entry of 4th Telco

As I write this post, there is confirmed news that MyRepublic, TPG Telecom and airYotta will compete to be the 4th Telco in Singapore.

Dividend Yield

StarHub has been maintaining its dividend of S$0.20 per share over the past years which makes it a great dividend stock. As of 2nd September 2016, the closing price for StarHub is S$3.47. Dividend yield is 5.76%.

With the entry of the 4th Telco and declining Pay TV business, I am expecting StarHub stock price to fall as low as S$3.00. If StarHub can substain its annual dividend of S$0.20, that will translate to a dividend yield of 6.67%.

Dividend Substainability

Dividend sustainability is another key question for StarHub. This is very much dependent on its free cash flow.

Using the chart taken from Stockflock, Net Cashflow for StarHub has increased as compared to 2015. It should be able to maintain its annual dividend of $0.20 for FY16.

StarHub 2Q Net CashFlow

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