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It is not sure by how much the share price of Starhub will decrease and then stabilise at a new level due to its current fundamentals. Based on its historical share prices, Starhub has traded at between slighty under 5% to close to 9% historical dividend yield before. The wide range of its traded historical share prices despite a general increase in dividends over the past 10 years and then dividends stabilised at 20 cents per share since 2010 onwards till now showed that the share prices may not trail in line with the dividends for this company. So, it is difficult to conclude where the share price should stabilise at with the impending potential reduction in dividends to 16 cents per share for this year.
However, if we examine the fundamentals of Starhub especially in the recent four years, the company does face a declining trend in free cash flow per share and the free cash flow per share for 2016 (11.0 cents) has dropped to about the same level as 2005' s free cash flow per share (12.1 cents). This certainly means concern in terms of whether Starhub can continue to sustain its dividends given the deteroriation in its free cash flow per share.
And as a whole if one examines its other financial metrics in terms of revenues, operating profits and net profits and its various margins there is not much to boast of except that it has struggled to maintain its resilient financial performance. However, with the current deteroriation in its free cash flow per share over the past four years, it does weigh down on the company whereby its businesses should have been one of a stable cash flow generator.
Let' s see whether their free cash flow per share generated this year will see any improvement. If not, it is very difficult to justify paying a high premium for owning a company with deteriorating or sustained low levels of free cash flows which cannot cover its dividends payout even that of guided 16.0 cents per share dividends.
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Free cash flow per share (cents) 12.1 16.3 27.4 22.2 26.9 23.2 26.2 24.3 17.0 19.0 12.5 11.0
Dividends per share (cents) 9.0 11.5 16.0 18.0 19.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0
angmohlin ( Date: 10-Feb-2017 17:00) Posted:
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Once the price has break the strong support of 2.73, then the price shall drop to 2.65, 2.59 and then 2.51in extension. Short term price may rebound to 2.82 & then 2.91 in extension.
Based on forecasted dividend of 16 cents, 7% yield which means the StarHub price should drop to 228. Long way to go from the current price of 279. The price must drop 18.27% from now on.