Starhub bottomed out?

30 May 2018, Starhub in a StraitsTimes article mentioned that they will be dropping out 11 TV channels from 30 Jun 2018 onwards.

Starhub's stock drop 4.5%.

Failed negotiation
Starhub's portfolio of educational channels will no longer be available to viewers due to a failed negotiation between Starhub and Discovery because it is not willing to pay a fair value for the programmes.

Types of disruption
Technology and piracy could be a part to play. Internet TV like Netflix and Youtube have disrupted the television business because of the availability of programs. Speed of internet also makes it faster to view the video clips and movies online. Piracy still exist because it markets itself as a cheap alternative to viewing starhub channels. A $45-$60 dollar a month subscription from Starhub could only cost you $8 per month with a pirated TV box, which is able to access most of Starhub's channel.

With multiple disruptions to its TV business, Starhub can no longer command a premium price for its TV subscriptions. Therefore, it is understandable why Starhub is not be willing to pay a premium to keep its educational portfolio.

Moving forward
Starhub can replace these channels with cheaper alternatives or to decide to slowly wind down their TV business and invest in new businesses to be able to sustain shareholders returns.

Source: Maybank Kim Eng - ketrade platform

10 year historical price chart

Starhub trading at close to crisis levels

Source: https://www.businesstimes.com.sg/companies-markets/discoverys-portfolio-of-11-tv-channels-to-be-dropped-from-starhub-after-june-30

Top 5 stocks at bargain prices

Sabana Reit - 18% dividend yield based on last year payout

Asian Pay TV - 21% dividend yield based on last year payout

Cache Logistics- 11% dividend yield based on last year payout

Wee Hur Holdings - 12% dividend yield based on last year payout

M1 - 9% dividend yield based on last year payout

M1, how low can it get?

Singapore telco M1 share price is plunging downwards. At $2.28, it is at 5 years low with dividend yield of 6.5%. Shareholders who buy M1 before 12 Apr 16 will be entitled to the payout of $0.083 per share.

5 Largest shareholding of M1

• Axiata 28.31%
• Keppel Corp 19.09%
• SPH 13.28%
• Colonial First State Asset Management (Australia) Limited 2.95%
• Macquarie Investment Management Limited 0.75%

Although there are talks of a 4th telco coming in, M1 had been in the telco business for a long time, and these telco assets were built up and maintained over the years.

M1 latest FY2015 showed a 1.5% growth, and despite that share price had been dropping continuously. 

M1 CEO Karen Kooi mentioned that with Netflix entering the Singapore market would provide a level playing field in the tv business. 

Although Singtel signed a strategic partnership with Netflix, it is still likely that M1 could be in talks with them to do some tie-up as well.

Source: http://www.channelnewsasia.com/news/singapore/singtel-netflix-sign/2425958.html

M1 does not own tv assets at the moment as compared to starhub and Singtel and if they are able to do tie up with Netflix, costs incurred would likely be lower than singtel and starhub.

Safety in volatile market

Many blue chip stocks have dropped today. Banks are facing an increase number of risks in relation to the economy.

Oil and gas companies and commodities companies had experienced a lower prices on their commodities. This may slow down loan growth in banks and also companies's ability to pay up.

Property stocks like GLP, Capitaland and HK Land, have dropped due to the weakening of the Chinese currency, with fears that a conversion back to Singapore currency will reflect lower profits.

Cargo volumes dropped, indicating a slowdown in overall economic activity. Companies with lesser profits result in their ability to pay back loans. This factor could lead to a slowdown in bank earnings.

The launch of Singapore bonds on 1 October 2015 will also reduce the amount of cash deposits held in banks as close to about $1 billion a month of Singapore bonds will be issued out in October.

Amid volatile markets and a possible correction, these 2 stocks provide safety in volatile markets:

1. M1
2. Q&M Dental

M1

• Oversold
• 6% dividend yield at current price
• Offer cheaper plan to scoop up bottom markets to scare off 4th telco

Q&M Dental

• Aggressively acquiring clinics in Singapore, Malaysia and China
• Closest to becoming monopoly in Singapore dental industry
• price to earnings growth stood at 0.3(PEG is undervalued if less than 1)  after Q2 2015 results

M1 target price $2.7

With news that IDA will offer a 60% discount, a forth telco entry sparked a big drop in M1 price. This 60% discount is restricted to new bidders only.

Source: http://www.todayonline.com/singapore/ida-offer-spectrum-lower-price-facilitate-entry-fourth-telco

The IDA said that it does not see the market as being able to support more than four players.

Even with news that a forth telco may be coming into the market, M1 had ramped up its efforts to capture market share by offering the cheapest mobile plans. This plans may lure in more subscribers in attempt to discourage a forth telco entrant. However, there are still no news of who will be the forth telco yet.

Source: http://www.straitstimes.com/tech/m1-rolls-out-cheapest-mobile-plans-aimed-at-consumers-who-do-not-need-handset-upgrade

What price to enter M1 given its attractive dividend yield of 6% at current closing price of 3.05?

5 year historical chart

Source: KE Trade

Trend lines intersect at $2.7
Target entry price: $2.7

20k Portfolio in Blue Chips SGX stocks

My perspective of a $20k blue chip stocks for retail investor. Below are a list of stocks that would construct a retail investor portfolio.

Prices of Stocks

• STI ETF ($3.38)
• M1 ($3.25)

4000 shares x STI ETF = $13,520

2000 shares of M1 = $6500

Total cost is = $20,020

STI ETF provides excellent diversification in the event of a single sector crash. Its top 5 holdings include 3 relatively strong Singapore banks namely DBS, OCBC and UOB.

Source: Bloomberg

Current Dividend Yield 2.75%

Over a 10 year period, the STI ETF provided a return of 9.06% including dividends and 5.89% excluding dividends

Source: STI ETF Annual Report

M1's recent drop in price due to news of a fourth telco had became an attractive buy with a dividend yield of 5.83%.

Source: Bloomberg

Its recent first quarter financial statements, M1 slashed off 16% of its debt. Lesser company debts keep M1's balance sheet healthy. 

19 Jun 15, chairman of M1 bought 50,000 shares at $3.23 each. This could be an indication of a slightly undervalued share value.

M1, a relatively stable Blue Chip Stock

M1 is relatively stable, given its consistent payout of dividends and rolling out of its 4G network. Although it only focuses on non-tv business, it experienced a healthy net profit growth of 6.6% in its 1st quarter of 2015 as compared to 2014.

It reduced its borrowing from $52 million to $3.8 million, a 92% reduction and also see its cash flow reduced by 83% from 103.9 million to $17.8 million.

Without the need to concentrate on TV business unlike Starhub and Singtel, it should have more resources to its 3 core services namely Mobile telecommunications, International call services and fixed services.