I have written a few articles on investing in StarHub, the latest one being StarHub Share Price. StarHub just announced its plans to retrench 300 employees (or 12% of its workforce), as a strategic transformation effort to compete better in an increasingly competitive environment. With this cost cutting effort which will improve its bottom line, is it time to buy StarHub now?
The immediate market reaction to this announcement has been positive on StarHub’s share price which closed $1.95 today.
Well, nothing very much has actually changed except for the fact that staff costs will go down, we need to calculate the positive impact to earnings.
With the leadership of new CEO Peter Kaliaropoulos, we however see the very first step taken to have the business more operationally efficient. Over the next few quarters, if we see business innovations and launch of services driving new revenue streams and growth, it will be seen as very positive developments.
StarHub currently pays dividend of $0.16 per share annually, though many do not believe it is sustainable. At current price of $1.95, the dividend rate is 8.2%. Even assuming dividend can only be sustainable at $0.12 (a further drop of 25% from current level), the dividend rate is 6% if StarHub share price is $2.
It is important to watch the earnings performance when the new norm happens as TPG joins the fray.
I would personally get interested to invest certain amounts if share price is traded at a discount to $2, using that as sort of a baseline protection of the intrinsic value of the company. Buying below $2 gives me a margin of safety and dividend rate is decent.
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