Tuesday, June 2, 2015

I Sold Starhub and Lose $$

I believe I should update, whoever have read my previous 2 write-ups (Part 1 & Part 2) on the drastic drop in the Telco Prices, that I have sold off my Starhub shares (and had a small loss incurred).

This is because Singtel Shares have dropped even more and I view it as an opportunity. Thus I decided to transfer my holdings to Singtel (despite incurring some losses).

Why Singtel? Not M1 or Starhub?

(1) Global Firm vs Local Singapore Firm

The drastic drop maybe due to the introduction of 4th Telco in Singapore. M1 and Starhub, being more focus within Singapore, will result in a greater drop in Revenue (if subscribers jump ship to 4th Telco). This will lead to lower profit then lower dividend. Dividend yield will drop of dividend payout dropped.

Global Firm, where majority of the revenue comes from Outside Singapore, the impact will not be so big. Thus, hopefully maintaining dividend.

(2) Same Business

At the moment before I sell, I have all 3 Telco Shares (Singtel, Starhub & M1). However I view Starhub & Singtel as having the same business model - esp. Cable TV vs Mio TV.

M1 is slightly different as they have a head start in Fibre Boardband (have to emphasize that Singtel is catching up) and being the smallest Telco here. In addition, they are expanding in Oman (new great opportunities).

(3) Singtel - The Owner of Our Telco Infrastructure

Remember the fire? Read it again.

But is Singtel free of All Risks?

No. Being a Global Firm, Singtel share prices will be more affected by external forces (ex. Greece Debt repayment, Optus financial, Australia Telco Regulations, etc).

Being a major player only within Singapore, will allow you to be less affected by these external forces.

Why Do I Still Keep M1?

This is my legacy stock - one of the first I bought. Average price is at $2.66. Therefore I will still be keeping it. (May load more if it drop more...) and also because of the following (these will applies to Starhub Investors as well):

(1) My stand that the market has oversold on the 3 Telcos is still valid. 4th Telco effect will not be felt by this year  (Read Timeline). Even if 4th Telco is launched by Dec and users jump onboard immediately, the finances will not be affected immediately. Thus, these stocks should be review when closer till the 4th quarter. Next year dividend should not be affected as well.

(2) All telcos have recurring revenue and created lock in periods for the users. Please remember, unless you intend to pay the fine, you are still lock in for 2 years.

(3) People nowadays cannot resist a new handset. A launch of the next smartphone (ex. IPHONE 7) will create another frenzy of customers to re-contract.

(4) Temasek seem to own a significant amount of shares (directly or indirectly) of all the 3 Telcos. "Parents will try not to let their children fail"

(5) 4th Telco is to create competition among the companies, which is only better for the consumers. It may also enhanced Starhub or M1 revenue instead.

(6) Bidders of the 4th Telco "expects" to gain about 10% to 15% of the market share. This is not drastic to M1 or Starhub. Nevertheless even if a dropped in Revenue, a company may still maintain its dividend amount.

(7) Starhub has the cable TV revenue. Enough said.

Conclusion

As stated at the start, I sold Starhub to shift my funds to Singtel as I deem it a better opportunity. However, I still believe all 3 Telcos are good buy at the moment with the significant drop in prices.

Finally, if you intend to trade/contra, please do not follow my lead. Only buy if you can hold and at a price you feel comfortable.

My only regret is that I may have bought the Starhub and Singtel shares a week too early. That is my mistake. I do realise that if I learn some Technical analysis (not being so stubborn about it) I may have predicted a better entering price. But that's another story.

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