SINGAPORE (June 23): Daiwa Capital Markets is keeping StarHub at “sell” with an unchanged target price of S$2.31, amid a series of M&A investments in the last few years.
Last month, the telco moved to acquire a 51% stake in cyber security systems integrator Accel Systems & Technologies for a total consideration of S$19.4 million.
In 2016, StarHub bought an 8.4% stake in a film producer mm2 Asia. It also holds a 30% stake in MediaHub, a data centre facility.
“While the company’s M&A strategy appears sensible, we also think it will take some time before any positives feed through its financials,” says Daiwa analyst Ramakrishna Maruvada in a Thursday report.
For now, however, StarHub will continue to face some strong headwinds.
According to Maruvada, StarHub’s main challenges will come from market-structure disruption and voice-to-data substitution in the mobile segment.
In addition, StarHub is staring down at a piracy problem in pay TV, which has intensified in recent quarters.
“Android-TV boxes, which fall in the legally grey area of ‘streaming’ technology, are now being openly sold in many public places,” says Maruvada. “The position of media regulator, which is required to assess the extent of damage to the pay TV industry, remains unclear to us.”
Maruvada notes that StarHub is Daiwa’s least preferred stock in the sector.
“Singtel’s geographic diversification and M1’s non-participation in pay TV market are key attributes that put them ahead of StarHub,” he adds.
As at 3.18pm, shares of StarHub were trading 2 Singaporean cents higher at S$2.72.