StarHub shares seen bottoming out after 42% plunge this year as incoming CEO steps up

Peter Kaliaropoulos, who was named StarHub's incoming CEO, on April 20, 2018.
Peter Kaliaropoulos, who was named StarHub's incoming CEO, on April 20, 2018. PHOTO: STARHUB

SINGAPORE (BLOOMBERG) - After plunging about 42 per cent this year, StarHub Ltd shares may be set for a modest turnaround, just as incoming chief executive officer Peter Kaliaropoulos takes over next week.

"There is a bottom," said Ramakrishna Maruvada, an analyst at Daiwa Securities Group Inc. He upgraded the shares to hold from sell last week, citing the plunge this year as evidence that the challenges from rival carriers and from entertainment platforms like Netflix Inc have been adequately discounted.

Mr Kaliaropoulos, who built a reputation as a turnaround executive by leading Zain Saudi Arabia, takes over July 9 and will have plenty to work on at the company. The entrance of a fourth player, TPG Telecom Ltd, in Singapore's mobile phone market is intensifying competition for subscribers, just as StarHub's bundling model in which it offers access to film, television and broadband services, is being challenged by streaming powerhouses like Netflix. The stock was moved from the MSCI Singapore Index in May to the small cap gauge.

There are "deep-rooted issues plaguing the company," said Mr Maruvada. "Its failure to adapt to changes in the external environment, and ineffective execution of its business plan" have contributed to the tumbling stock price.

Earnings per share probably slumped 38 per cent to $0.03 in the quarter ended June, according to the average analyst estimate, an eighth straight quarter of decline.

StarHub "has always been and will continue to be committed to driving the business and delivering shareholder value", Jeannie Ong, the company's chief strategic partnership officer said. "For example, we are boosting network and customer service quality to drive cost efficiencies and accelerating organic and inorganic growth in our enterprise business."

The company declined to comment on the incoming CEO's plans for the company ahead of his start date.

Still, at least four brokerages have upgraded the stock over the past month. The carrier is trading at an enterprise value about 6.2 times trailing earnings before interest, taxes, depreciation and amortisation, compared with the about 13 times average for companies in the Straits Times Index.

Rival Singtel has also faced rising competition, with its shares slumping 15 per cent this year, while M1 Ltd, the other established wireless carrier in the city state has slumped 11 per cent.

To spark a rally, Mr Kaliaropoulos will have to address the consumer segment including the Pay-TV and mobile service that "cast a shadow on the whole business", said Sachin Mittal, an analyst at DBS Group Holdings Ltd based in Singapore.