A Stock Analysis Report On Starhub Economics Essay

A Stock Analysis Report On Starhub Economics EssayThe backwash of the financial crisis in the year 2008 has adversely affected the economic systems in the globe causing liquidity in the credit markets to dry up and in conclusion resulted in many financial institutions facing insolvency issues. Businesses around the world faced tough times in getting funds as banks became conservative in lending. Financial authorities around the world thus took measures in a bid to control the wide spread of the crisis to reduce the impacts. capital of capital of capital of capital of capital of capital of Singapore was not spared in the crisis too and now sees massive funds, monetary policies and fiscal plans being implemented to ease the situation.In 2009, Singapores GDP decreased by 7.5% from a harvesting valuate of 21.7% in the post-crisis bounce Q2 to 14.2% in Q3. However, there were increasing signs of recovery in Q3, showing an expansion of all spheres in the deliverance. This reflected a better-than-expected stunnedcome for Singapores GDP appendage forecast for 2009 and has been revised upwards to between -2.5% and -2%, from -6% to -4%. The decrease in unemployment wander from 3.1% in 2005 to 2.2% in 2008 as shown in addendum circuit board 2.1 also signals that the Singapore economy is recovering from economic slowdown.1.2 Critical Variables affecting Singapore economyWe have identified several critical variables that have significant impact on the Singapore economy. They are namely, the monetary constitution, fiscal policy, and external trades.1.2.1 Monetary PolicyOne of the key initiative of MAS to ease the economy is adopting monetary policy strong kit and caboodle through manipulating the exchange rate to influence the economy to achieve low ostentation and sustainable growth, taking into consideration the fact that the nature of Singapores economy is strongly correlated because of the economys reliance on exports and the city-state imports virtual ly all of its needs which will be covered in section 1.2.5 Singapore Export. This resulted in MAS relying on the specie rather than its interest rate as its policy tool.Currently, MAS has abandoned its strong currency strategy in which it has implemented since April 2004 and has maintained its loose monetary policy zero per cent postponement for the Sing dollar despite a modest recovery from recession since 2002 (CNA, 2009a). The maintaining of its relaxed monetary policy of zero per cent appreciation of the S$SNEER policy band came about on October 10, 2009 (Bloomberg, 2009). This naked as a jaybird policy is a complete U-turn of MAS stance when MAS called for a quicker exchange-rate appreciation to tame inflation six months ago. Strengthening the Sing dollar, which has been adopted by MAS since April 2004, is a move to tame the increasing inflation as Singapores annual inflation rate has moved up to 7.5% in a new 26-year record high (CNA, 2009b). However, inflation for the upc oming year is expected to fall with the increase in trade good charges.Although MAS Monetary Policy Statement does not state the reason for the new policy except that the economy is deteriorating and inflation is on the rise rapidly, we analyze that the new policy will help Singapore exporters in the long run, and this will be covered under section 1.2.5 Singapore Export. This will encourage a strong growth recovery in the upcoming year and we foresee that the Singapore economy will be favorable to investment despite the meritless world economy originating from US recession. This is due to the fact that Singapore does not rely only on US but new(prenominal) trading partners from other nations.1.2.2 Fiscal PolicyOn the fiscal front, the governing has been responsive to the evolving challenges confronting the Singapore economy and has enforced it full force. Subsequently, with the on stripe of the global financial crisis and credit crunch, the administration announced a $2.3 zi llion litterage towards the end of 2008 to loosen credit lines and help local businesses gain access to loans (MAS, 2009).In view of the rapidly deteriorating economic environment, a $20.5 billion (8.2% of GDP) resilience package was delivered to save jobs, to address structural challenges, help viable companies stay afloat and enhance the economys long-term capabilities. For instance, the corporate income task rate will be reduced from 18% to 17%, starting from YA2010, to boost competitiveness and attract investment to spur job creation. In addition, the brass is also pressing ahead with long-term investments in infrastructure, education and healthcare to make Singapore a world-class city. Thus with these policies implemented, growth rate for Singapore economy is expected to rise boost in 2010 (IRAS, 2009).1.2.3 InflationInflation occurs when consider exceeds communicate, causing prices of goods and services to rise. everywhere the years, the Singapores inflation rate has be en on a rise from 0.5% in 2005 to 6.5% in 2008 which is in line with the consumer price index (CPI1) which also raised from 100.4 in 2005 to 110.3 in 2008 as shown in Appendix Table 1.4 (Government of Singapore, 2009). The rise in inflation is mainly driven by high food and transport costs in Singapore. This leads to slower growth of the money supply in the economy as well as higher interest rate are charged for borrowing money. Monetary Authority of Singapore (MAS) has lately announced that its inflation forecast for 2010 to be between 2.5 and 3.5 per cent as a flood of foreign investment raises as square up-bubble worries (JakartaGlobe, 2009). A fall in inflation means that the overall price level of goods will decrease and that consumer purchasing power will raise, simulating consumer spending as well as the economy.1.2.4 External FactorsThe prognosis of Singapores economy is closely linked to global conditions which is the international trade performance. In other words, posit ive global economic developments would suggest a healthy economy in Singapore. Singapores consumer price index (CPI1) is driven by external factors such as oil and food commodity prices which is determined by the growth of the world markets. Emerging market economies, especially in Asia, continue to recover strongly. For instance, Indonesia, Singapores fourth largest trading partner, with bilateral trade valued at S$75.1 billion dictum a rise of 13 per cent from 2007 (Borhan. H., 2009). In addition, private- area economists currently expect the US economy to expand by 2.7% in 2010, from a projected -2.4% this year, adding further to the bright outlook of the export markets.1.3 Forecast for Singapore EconomyWe expect that the growth in the first and second quarters in 2010 is likely to be moderated, taking in the fact that exportation is expected to remain depressed. However, in the third quarter onwards, we analyse that the economy will shift towards positive as a result of the st imulative policies implemented by the disposals of its trading partners. The Singapore economy will thus ride on this wave of economic recovery and progression. In addition to this is the fact that MAS will continue to be vigilant over the progress of the economy and has implemented a series of policies.With the continued executing of the S$SNEER policy, it will further strengthen Singapores export markets, encouraging an increase in its export rates due to cheaper goods from Singapore. Furthermore, the resilience package which the government delivered will continue to reap positive performances in the economy as more companies are able to tide through this tough period, saving jobs and increasing employment rate in the process.2. INDUSTRY ANALYSIS2.1 Overview of Singapore Info talk IndustryWe have selected info communication sedulousness as the industriousness suitable for investment. Over the years, the infocomm exertion has greatly enhanced Singapores competitiveness by rai sing productivity and transforming business processes.2.1.1 Defensive IndustryWe have indentified infocomm constancy as a defensive industry. Telecommunication and internet services are an integral part of business operation and will still be lease even in times of recession. The info communication industry plays an important and essential role that supports the Singapore economy to function as a major communication hub. As such, our selected industry will appeal to investors as defensive industries as the values of these stocks are generally maintained during economic downturn.2.1.2 Market Structures OligopolyThe Singapore infocomm industry was liberalized in April 2000 by IDA to promote competition among animated players and create opportunities for new market entrants. Following that, big companies like StarHub and M1 were awarded licenses to set up telecommunications trading operations in Singapore (IDA, 2000). This leads to a transition of the market structure from monop oly previously dominated by SingTel to oligopoly.Singapores Info-communication industry is dominated by three major companies namely, SingTel, MobileOne (M1) and StarHub. Currently, SingTel holds the itemise one position with a 46.4% market share. StarHub came in second with 27.9% market share while MobileOne stands third with 25.7% market share as of 2008 (IR Market query Corp, 2009). Since a large percentage of the market is trailn up by these firms, they tend to cooperate with each other by keeping their prices competitive to take full advantage of the profits in the industry.2.1.3 Past Sales and Earnings PerformanceSingapores info communication industry is one of the key contributors to the Singapore economy. From Appendix Chart 2.2, we infer that the overall infocomm industry undergo a stage of constant growth during the period of 2004-2008. The revenue enhancement of the industry has been constantly increasing from $34.77 billion in 2004 to $58.10 billion in 2008. This re presents an overall growth of 40.2 per cent (IDA, 2008a). Based on the trend given in Appendix Chart 2.2, we infer that the infocomm sector has past the rapid acceleration growth and currently in the stage between mature growth and stablisation market maturity. The public are now familiar with the industry, profit margin continues to grow and begins to stabilise as shown in past three years performance.The Info communication industry in Singapore relies on both the domestic and export markets. Since the domestic market is limited to Singapore, major companies in the sector such as SingTel have expanded its business to overseas. In 2008, the 61% of Singapores infocomm total revenue was contributed by export composition (IDA, 2008c). Based on the annual survey of info communication industry 2008, Singapores infocomm export experienced a constant growth rate of 77.6% from 2004 ($19.86 billion) to 2008 ($35.28 billion) as shown in Appendix Chart 2.4. While Singapores infocomm domestic experienced an overall grow of 53.1% from 2004 ($14.91 billion) to 2008 ($22.82 billion) and strong growth of 25.9% from 2007 ($18.13 billion) to 2008 ($22.82 billion) as shown in Appendix Chart 2.5 (IDA, 2008c).2.2 Government Initiatives towards Info Communication IndustrySingapores government support plays an important role in the growth of the infocomm industry. Over the years, IDA has been continuously running(a) on creating demand and opportunities to enhance competition and sustain growth in the infocomm industry through short and medium term policies, regulations and guidelines. For instance, IDA has been working on programmes such as the Overseas Development Programme to assist local infocomm companies in expanding into international markets through collaborating with major local infocomm companies (IDA, 2009a). Singapore export infocomm has been a key contributor to the overall growth of the industry. In 2008, 61% of Singapores Infocomm total revenue was generated by the e xport sector (IDA, 2008c).On top of that, the government has recently developed a go-to-market strategy to accelerate market access and expand business opportunities through marketing products and services offered by local infocomm companies to likely foreign customers through overseas tradeshows and seminars (IDA, 2009d). This would help promote the Infocomm industry, create more overseas business opportunities as well as increasing the profit margins of Singapore Infocomm exports in the following financial year.As for domestic of infocomm, the government will be investing S$1.73 billion on the infocomm industry to meet the demand of businesses and citizens through increasing business efficiency (IDA, 2009c). To promote effective competition, IDA has also recently released new advisory guidelines which obligates major mobile operators such as SingTel, StarHub and M1 to arrest the flash-frozen early termination charges on customers who sign on mobile contracts for no longer than three months and terminate before the end of their contract with effect on 1 March 2010. This would mean higher competition between firms in the upcoming year which would aid in the growth of the industry (IDA, 2009e).2.3 Porters belligerent Forces Model2.3.1 Rivalry among Existing FirmsThe rising demand for mobile broadband services has attributed to the stronger competition between the three major operators SingTel, StarHub and MobileOne. Competitors are now providing higher quality and value-added services at more attractive prices. For instance, SingTel is offering the all-in-one Mio Home packages that include broadband Internet access, home fixed line and Mio TV at an attractive price. In addition, SingTel and M1 are also offering rewards such as monthly bill rebates to promote loyalty from existing subscribers and new phone set at attractive prices to attract new customers. Besides that, they are also offering full mobile number portability services to allow subscribers to retain their existing phone number even if they switch to another service provider. As such, the competition between these companies would further drive the infocomm industry.2.3.2 Bargaining Power of CustomersSince Singapore Infocomm sector are dominated by SingTel, StarHub and M1, customers will have to accept the service plans offered by these companies. As such, customers in the telecommunication industry have little talk terms power since the price of products and services are mainly determined by these companies and. For example, customers who wish to buy an iphone would need to subscribe to 3G data plans and pay a fixed price plan set by the mobile provider. Thus, even if there is a price cut, it is most likely caused by competition within the industry rather than customers bargaining power (MSN, 2009). As such, major infocomm companies have the ability to influence the market price of their products and services while keeping prices competitive to take full advantage of the profit margin thus making the industry attractive to invest.2.3.3 Bargaining Power of SupplierThe suppliers of the major infocomm companies are recognised as having strong bargaining power over the industry. For instance, the suppliers of StarHubs Max Cable TV are mainly contents providers such as Cartoon Network, HBO, etc and handsets suppliers such as Nokia, Sony Ericsson, etc. With the recent acquisition of the distribution rights of Apple iPhone, Apple Inc would become the new supplier of StarHub. These suppliers have high power in exercising the price and quality of the product. For example, in order to broadcast a particular channel on Max Cable TV, StarHub would need to pay a price set by the channel providers.2.3.4 Threat of New EntrantsThe ownership of a telecom license can represent a huge barrier to entry. Singapore infocomm industry of was liberalized in April 2000 by the government with the objective to increased competition among existing players and to create opportu nities for new market entrants. However, since most citizens already own at least(prenominal) one mobile phone and tied to their service plans, it would be difficult for new entrant to penetrate into the market as they would need to come out with a large sum of money for set up as well as to compete with existing competitors in price, quality and services. As such, the scourge of new entrant to major players such as SingTel and StarHub is low (Point-Topic, 2009).2.3.5 Threat of Substitute Products or ServicesOur team infer that there are currently no close substitutes in other industry since the Singapore infocomm industry is constantly keeping up with new technology and infrastructure it would be baffling for other industries to come out with substitute products or services. As such, the threat of substitute products or services to the major infocomm companies is also minimal.2.4 Forecast for Info Communication IndustryIt is expected that the info communication industry will mai ntain its performance in this economic slowdown. The defensive industry as a whole remains stable and continues to grow even at times of economic slowdown which is an appealing choice for investor. Thus we have grounds to believe that revenue for infocomm industry will sustain and that the industry will achieve a stronger grow to be in line or even go beyond the forecasted growth of the general economy for 2010 (IDA, 2008a).3. COMPANY ANALYSISREFERENCESBloomberg. (2009). Singapore, in recession, ends currency gain policy (update2). Retrieved celestial latitude 19, 2009, from http//www.bloomberg.com/apps/news?pid=20601087sid=a0P7GXmf4hEsrefer=homeBorhan. H . (2009). Islands of optimism. Retrieved celestial latitude 20, 2009 from http//www.iesingapore.gov.sg/wps/portal/WCMPreview?WCM_GLOBAL_CONTEXT=/wps/wcm/connect/My+Portal/Main/Past+Events/Islands+of+optimismBusiness Wire. (2009, August 12). Research and markets Singapore key statistics, telecom market and regulatory overviews. Ret rieved declination 15, 2009, from LexisNexis schoolman database.BuySingapore. (n.d.). Singapores infocomm technology (ict) industry. Retrieved December 15, 2009, from http//www.buysingapore.com/InfoComTechnology.aspxChannel intelligence information Asia. (2009a). Singapore will maintain policy of steady dollar. Retrieved December 18, 2009, from http//www.channelnewsasia.com/stories/singaporebusinessnews/view/1010760/1/.htmlChannel News Asia. (2009b). Singapore inflation rate hits new 26-year high of 7.5% in April. Retrieved December 18, 2009 from http//www.channelnewsasia.com/stories/singaporelocalnews/view/349581/1/.htmlChoudhury, A. R. (2009). Singapores fixed broadband subscriber base to cross 1m. Retrieved December 15, 2009, from http//a1preview.asia1.com.sg90/vgn-ext-templating/v/index.jsp?vgnextoid=ae8f219aeaf63210VgnVCM100000430a0a0aRCRDvgnextchannel=802a67c086322110VgnVCM100000bd0a0a0aRCRDGovernment of Singapore (2009). Time series on cpi (2004=100) inflation rate. Retri eved December 15, 2009, from http//www.singstat.gov.sg/stats/themes/economy/hist/cpi.htmlIDA. (2008a). Performance of the infocomm industry. Annual survey on infocomm industry for 2008, (p. 7). Retrieved December 15, 2009, from http//www.ida.gov.sg/doc/Publications/Publications_Level2/20061205092557/ASInfocommIndustry08.pdfIDA. (2008b). Performance of the infocomm industry. Annual survey on infocomm industry for 2008, (p. 8). Retrieved December 15, 2009, from http//www.ida.gov.sg/doc/Publications/Publications_Level2/20061205092557/ASInfocommIndustry08.pdfIDA. (2008c). Performance of the infocomm industry. Annual survey on infocomm industry for 2008, (p. 9). Retrieved December 15, 2009, from http//www.ida.gov.sg/doc/Publications/Publications_Level2/20061205092557/ASInfocommIndustry08.pdfIDA. (2009a). Overview. Retrieved December 15, 2009, from http//www.ida.gov.sg/Infocomm%20Industry/20060406160952.aspxIDA. (2009b). Internationalisation. Retrieved December 15, 2009, from http//www.id a.gov.sg/Infocomm%20Industry/20060418122545.aspxIDA. (2009c). Singapore government continues to invest in infocomm. Retrieved December 15, 2009, from http//www.ida.gov.sg/News%20and%20Events/20050713151856.aspx?getPagetype=20IDA. (2009d). Public service infocomm exports receive stronger push. Retrieved December 15, 2009, from http//www.ida.gov.sg/News%20and%20Events/20090615154025.aspx?getPagetype=20IDA. (2009e). Consumers to benefit from new guidelines on telecommunication services. Retrieved December 15, 2009, from http//www.ida.gov.sg/News%20and%20Events/20091215141259.aspx?getPagetype=20IR Market Research Corp. (2009). 4Q09 Singapore mobile operator forecast, 2009. Retrieved December 17, 2009, from http//www.marketresearch.com/product/display.asp?productid=2495384IRAS. (2009). Overview of Tax Changes Announced in Budget 2009. Retrieved December 20, 2009 from http//www.iras.gov.sg/irasHome/page.aspx?id=7906JakartaGlobe. (2009). Singapore expects growth, but asset bubbles a worry. Retrieved December 15, 2009, from http//thejakartaglobe.com/business/singapore-expects-growth-but-asset-bubbles-a-worry/342607MAS. (2009). Recent Economic Developments in Singapore. Retrieved December 20, 2009, from http//www.mas.gov.sg/resource/eco_research/eco_dev_ana/Recent_Economic_Developments.pdfMNEWSP. (2009, September 2). Singapore fund third quarter earnings. Retrieved December 15, 2009, from Factiva database.MSN. (2009). Singtel wins epl rights. Retrieved December 15, 2009, from http//sports.sg.msn.com/commented/article.aspx?cp-documentid=3616738ucpg=4capital of Minnesota Budde Communication. (2009a). Singapore telecommunications infrastructure. Retrieved December 15, 2009, from http//www.researchandmarkets.com/reportinfo.asp?cat_id=330report_id=223874q=Starhubp=1Paul Budde Communication. (2009b). Singapore telecoms, mobile and broadband. Retrieved December 15, 2009, from http//www.researchandmarkets.com/reportinfo.asp?cat_id=330report_id=838318q=Starhubp=1Point-Topic. (2009). Singapore broadband overview. Retrieved December 15, 2009, from http//point-topic.com/content/operatorSource/profiles2/singapore-broadband-overview.htmReuters. (2009a). Update 1-singapore lifts inflation view, sees modest 2010 growth. Retrieved December 15, 2009, from http//news.alibaba.com/article/detail/markets/100202930-1-update-1-singapore-lifts-inflation-view%252C.htmlReuters. (2009b). Singapore lifts inflation view, sees modest 2010 growth. Retrieved December 15, 2009, from http//www.themalaysianinsider.com/index.php/business/43905-singapore-lifts-inflation-view-sees-modest-2010-growthReuters. (2009c). Singapore forecasts 2010 GDP to rise 3 to 5 per cent. Retrieved December 15, 2009, from http//www.asiaone.com/Business/News/Story/A1Story20091119-180874.htmlStarHub. (2009). Home hubbing pack lite at $41.73 per month. Retrieved December 15, 2009, from http//www.starhub.com/promotions/hubbing/97569.html