Starhub

(16-09-2014, 11:07 PM)BaCONFTW Wrote:

(19-08-2014, 10:13 PM)Stecano Wrote: This is the first time (maybe last ) I try to manually calculate intrinsic value.
Comments, corrections and feedback much appreciated.

[img][Image: starhubDCF_zps0b458013.jpg][/img]

Hi stecano

First of all, i must qualify im not finance trained so if i made a mistake, pls excuse me. Just trying to learn and what better way then thru mistakes?

Anyway to comment, i think u are trying to do a dcf analysis? I usually refer to this: http://www.investopedia.com/university/dcf/dcf4.asp. So if i understand the website correctly, would like to make the following comments:

1. I won't comment on the projected cashflow for the next 10 yrs for now. Thats the art i guess.

2. Shouldn't we calculate the Terminal Value(TV) of the cashflow based on the gordon growth model? If i assume a WACC of 6% and long term cash flow growth of 2%, that gives me a TV of $15.782 bil.

3. From the projected cash flows and the TV, and discounting to my assumed WACC, that gives an Enterprise Value (EV) of $13 bil. Your calcs seem to not include both TV and EV.

4. Taking away the net debt (borrowings minus cash, i too this from AR13), the Firm Value (EV minus net debt) is $12.6 bil. Dividing this over no of shares of 1.728 bil, this gives intrinsic value of $7.28 per share.

5. For the discount rate, may i know why u assumed 8%? Starhub's cost of debt is barely 3% from AR13. And i have used a WACC of 6% to be conservative. I calculated the WACC based on an assumed cost of equity of 10%, and an assumed cost of debt of 5%, and i thought i was being extra conservative

Can other learned buddies care to comment? Thanks much!

Hi BaCONFTW,

Yes, I was doing a simplified dcf. I don't know all the theory behind it and mostly copy it blindly. I chose 8% to be conservative just to see how it turns out.
Beyond that, it was just out of curiosity and I simply wanted to see what would be the ballpark figure.

(22-09-2014, 07:52 PM)Stecano Wrote:

(16-09-2014, 11:07 PM)BaCONFTW Wrote:

(19-08-2014, 10:13 PM)Stecano Wrote: This is the first time (maybe last ) I try to manually calculate intrinsic value.
Comments, corrections and feedback much appreciated.

[img][Image: starhubDCF_zps0b458013.jpg][/img]

Hi stecano

First of all, i must qualify im not finance trained so if i made a mistake, pls excuse me. Just trying to learn and what better way then thru mistakes?

Anyway to comment, i think u are trying to do a dcf analysis? I usually refer to this: http://www.investopedia.com/university/dcf/dcf4.asp. So if i understand the website correctly, would like to make the following comments:

1. I won't comment on the projected cashflow for the next 10 yrs for now. Thats the art i guess.

2. Shouldn't we calculate the Terminal Value(TV) of the cashflow based on the gordon growth model? If i assume a WACC of 6% and long term cash flow growth of 2%, that gives me a TV of $15.782 bil.

3. From the projected cash flows and the TV, and discounting to my assumed WACC, that gives an Enterprise Value (EV) of $13 bil. Your calcs seem to not include both TV and EV.

4. Taking away the net debt (borrowings minus cash, i too this from AR13), the Firm Value (EV minus net debt) is $12.6 bil. Dividing this over no of shares of 1.728 bil, this gives intrinsic value of $7.28 per share.

5. For the discount rate, may i know why u assumed 8%? Starhub's cost of debt is barely 3% from AR13. And i have used a WACC of 6% to be conservative. I calculated the WACC based on an assumed cost of equity of 10%, and an assumed cost of debt of 5%, and i thought i was being extra conservative

Can other learned buddies care to comment? Thanks much!

Hi BaCONFTW,

Yes, I was doing a simplified dcf. I don't know all the theory behind it and mostly copy it blindly. I chose 8% to be conservative just to see how it turns out.
Beyond that, it was just out of curiosity and I simply wanted to see what would be the ballpark figure.

Ahh okok got it. I guess from here we can see how impt our assumptions are. They can really influence our decision. An 8% discount rate and a 6% discount rate could mean the difference between a buy and a sell!

Sadly i don't think i have mastered the art of finding a stock's intrinsic value yet

Required rate of return is probably the largest pitfall in forecasting as it is highly correlated with interest rate environment

Thats because it is academically intrinsically linked to what statistically historically the market is requiring for the listed stock. Loaded sentence but it also shows the problems involved. Historically equity returns has been 8-12% but volatile. The "genius" of Madoff was he offering 8% straight line for equity product.

Some people do the reverse by calculating what is market implied rate of return for the stock and see if that is reasonable

But value investors do know that it has to be MINIMUM the inflation rate. So most back of the envelope calculation is based on this premise (or they simply sum up the cashflows and use a simple discount) but more importantly is the MOS ascribed to the valuation which is an art cause it is a qualitative judgement based on the asset quality and industry certainty

Thats another reason why a sustained non volatile inflation is a key goal of modern central bank policy making

Will you pay $5.35 for the service? I don't use the service, but wondering will the 2-sim-card phone play the same trick?

(not vested)

StarHub launches 2-in-1 mobile number service

SINGAPORE - StarHub post-paid customers can now utilise two mobile numbers from a single SIM card and phone through a new app launched today.

The new Starhub ‘2-in-1 LINE’ app, available for both iOS and Android devices, allows subscribers to activate and connect a second mobile number onto their existing phone and line. Users can then make calls and SMSes from their primary phone, but with the secondary mobile number displayed on the recipient’s caller ID.

According to Starhub’s Senior Vice President of Mobility Mr Chan Kin Hung, the service is targeted at consumers who want a way to conveniently manage their business and casual contacts. The telco said it is the first to provide such a service in Southeast Asia.

The new app will also include a separate mobile address book and call and text logs, comprehensive call filtering and blocking options and a voicemail inbox with personalised greetings. All outgoing calls and global/roaming SMS however will still be deducted from the customer’s primary mobile plan bundle.

Starhub is offering early adopters of the service (those who sign up before 31 December 2014) free access to the service for three months amd unlimited local SMSes till the end of the year. The service will cost $5.35 per month.
http://www.todayonline.com/singapore/sta...er-service

Have M1 and Singtel done the same?

It is also an current issue for Indonesia telcos
http://www.todayonline.com/tech/indonesi...ver-rights

StarHub faced similar accusation

Singapore’s second-largest telco StarHub faced a similar situation in 2010, when the owner of an online maternity retail shop accused it of placing ads on her website without prior consent.

But technology lawyers here say it is not entirely illegal in Singapore for telcos to place ads without permission.
...
http://www.todayonline.com/tech/starhub-...accusation

Starhub announced its 9 months result today.

Presentation slide: http://infopub.sgx.com/FileOpen/PS3Q2014...eID=322961

In brief, in 9 month of FY2014, service revenue reduced by -1%, net profit after tax reduced by -4%. Further detail in segment contribution shows that the culprit was the broadband service. The competition in fiber broadband has made a dent on Starhub broadband service business.

(not vested)

 Revenue: Maintain service revenue at about 2013’s level
 EBITDA: Maintain EBITDA margin on service revenue to be about 32%
 CAPEX: Maintain cash capex to be about 13% of total revenue
 Dividend: Declare interim cash dividend of 5.0 cents per share for
3Q2014
Intend to maintain annual cash dividend payout of 20.0
cents per share for FY2014

Continue going strong ?

Starhub announced its end-year result.

Presentation slide: http://infopub.sgx.com/FileOpen/PSFY2014...eID=335978

In brief, in FY2014, service revenue reduced by -1%, net profit after tax reduced by -2%. The culprit was the broadband service, with a reduction of -16.5%

Starhub is the only Singapore telco having negative growth in FY2014, IIRC.

(not vested)

If you take a look at their free CF, you will find that there is a very slim chaance for their dividends to grow. Almost 100% payout. It is good if they can maintain it already.

Actually Starhub is a very unique company. If it holds back 2 years of dividend and use it to repay borrowings, it can pump up its dividends by 6% because it no longer has to pay interest expenses and can rewards shareholders more.