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StarHub share price to plunge after being boot out of STI?

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Can it get any worse for StarHub? On 6 September, FTSE announced that Starhub will be booted out of Straits Times Index (STI) on 24 September. With this latest development, I fear the worst for StarHub share price.

In recent years, there had been a few cases of local blue chips suffering from terrible fate after being booted out of the prestigious STI. Examples are SIA Engineering and Noble Group. In this regard, is StarHub share price poised for another major correction? Should investors sell everything and run for their lives?

In this article, the dynamics of the local telco industry are examined and the outlook for StarHub share price is discussed.

StarHub share price

Another wild ride for StarHub share price?

Drawing from recent cases, shareholders should brace themselves for another roller-coaster ride of StarHub share price. Shares of aviation heavyweight, SIA Engineering, went on a tailspin after being kicked out of the STI, dropping from $3.50 in September 2017 to the current $2.90. And let’s not even talk about Noble Group. After bowing out of STI in 2016, Noble Group had been in financial wilderness, going from crisis after crisis. Currently, Noble Group’s shares are almost worthless.

According to Infocomm Media Development Authority (IMDA), the mobile penetration rate in Singapore is about 150%, making Singapore one of the most well-connected countries in the world. This means that some of the subscribers may be using more than one line. For a telco that focuses its growth solely in Singapore, the outlook is indeed worrying for Starhub. Indeed, Starhub share price plunged from $3.90 in 2016 to the current $1.67 after news of fourth telco broke out two years ago.

Since 2005, the total dividends dished out by StarHub is a staggering $2.40, making StarHub one of the best dividend stocks in the market. So for those long-term investors who held StarHub shares since 2005, they are still sitting on substantial paper gains. However, the same cannot be said for those who entered when StarHub share price was trading at $4.00 in 2013. For this group of shareholders, they would be staring at massive paper losses, even if the dividends had been factored in.

Market risk for StarHub share price

The case of StarHub [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: September 19, 2018 — 12:00 pm

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