Thursday, October 1, 2009

Singtel Won the EPL rights! Star Hub lost!

Yup, Singtel won the EPL rights from star hub. And now they have the rights to broad cast the EPL and champions league star sports, ESPN.

This has caused a devastating blow to Star Hub. A drop of 6.5% in their share price! Compared to a rise of 1% in Singtel's share price. ( This is due to the bad market sentiments today)

I was very tempeted to buy into Star Hub, as the drop is really too big for a single day drop, for such a blue chip. But before doing so, I wanted to look at star hub's financial sheet first.

Below is a segment of a financial report by Philips securities.

As you can see, cable TV takes up around 18.7% of total revenue in 2008. And if you realized, this report foretasted that the revenue from cable is set to increase in the next 3 years. This means that cable TV is seen as the market segment that Star hub is expected to excel in.

However with a lost in the broadcasting rights for the EPL, I would think that Star hub will not be able to achieve such growth in their cable TV business segment. Hence, even though there is a drop of 6% in their share price, the company's stock might still be overvalued!

On the other hand, Star hub is having a current yield of 7.9%. And it seems like their core business is highly defensive in nature, i.e mobile lines, network lines etc. ( I mean will you cancel you hand phone line in a bad economy?). So even if the yield drops to 5%, it is still much higher than any fixed deposits now.

Hence, after looking at all this, I am still a little skeptical. I will need to look at Singtel and M1 again before deciding which Tel Co to buy into. Singtel might not be the obvious choice, even though they won the EPL rights.

This is because, a report that I read states that Singtel is not expected to win the bid, because its uneconomical for them to do so. If this is true, I feel that this bid by Singtel is aimed at winning a bigger market share, which might prove beneficial to them, since now they can bundle their MIO TV with EPL and champions league etc. at a higher price.

From the TA point of view, star hub is a good buy.

Your call!

1 comment:


Sounds like the names of a couple of companies in the dot com bubble of 2000.