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Top Stock Highlights of the Week: StarHub, Sembcorp Marine and Singtel-Bharti

·4-min read

Here are summaries of interesting corporate developments surrounding two blue-chip companies and a telecommunication business.

StarHub Ltd (SGX: CC3)

Telecommunication company StarHub announced that it had acquired a 50.1% stake in the broadband division of MyRepublic Group Limited.

MyRepublic is a telecommunications operator with businesses in Singapore, New Zealand and Australia.

The group will pay up to S$162.8 million for the stake, with S$70.8 million upfront and another S$92 million in deferred payments should performance metrics be met.

MyRepublic’s broadband currently holds a 6% market share in Singapore as of 31 March 2021 and has an asset-light operating model.

The business has a total of 175,000 regional subscribers, of which 89,000 belong to Singapore. It also generated S$10.4 million in net profit for the fiscal year ended 30 June 2021.

The rationale for this acquisition is to grow StarHub’s broadband business further with the addition of 89,000 subscribers for a total combined subscriber base of 578,000 as of 30 June 2021.

The group will also enlarge its market share from the current 34% to 40% through this purchase, putting it within a hair’s breadth of the market leader Singtel.

In terms of broadband revenue, the acquisition will also boost this to S$240 million, close to Singtel’s broadband revenue of S$257 million.

Investors should cheer this acquisition as it will boost StarHub’s pro-forma net profit by S$5 million to S$163 million, assuming the purchase was completed in the previous fiscal year.

It also opens up opportunities for the group to leverage on MyRepublic’s regional enterprise customer base for potential cross-selling, while tapping on its cloud-based, open-source digital platform to further enhance StarHub’s digital initiatives.

Sembcorp Marine Ltd (SGX: S58)

Right after we wrote about Sembcorp Marine’s, or SMM, massive rights issue and how Temasek Holdings needs to make a general offer for the rest of its shares, the group released an announcement that very morning confirming this action.

Startree, a wholly-owned subsidiary of Temasek, has made an offer to acquire all the shares of SMM at S$0.08 per share.

As the investment firm’s holdings increased by more than 1% as a result of the take-up of the rights issue, the requirements of the Singapore Code on Takeovers and Mergers require Temasek to make a mandatory conditional general offer for the rest of the shares it does not own.

This offer price is final and will not be revised, and investors have 28 days after the posting of the offer document to decide if they wish to accept it.

Startree intends for SMM to remain listed but may change its stance depending on the final level of acceptances received.

In response to this offer, SMM has appointed an independent financial adviser (IFA), Provenance Capital Pte Ltd, to advise the directors on the offer.

A circular containing the advice from the IFA and directors of SMM will be sent to shareholders within 14 days from the despatch of the offer document.

Singtel (SGX: Z74)

Singtel has lent its support for its 14% stake in Bharti Airtel and will fully subscribe to the latter’s rights issue.

The rights issue price is set at INR 535 per share and will cost Singtel a total of US$405 million over three years.

With this successful rights issue, Airtel can then invest in 5G capabilities and capture the anticipated huge growth in smartphone users in India, which is expected to reach over 900 million in the next two years.

Investors should note that this move makes up a key piece of Singtel’s plan to ride digital growth after the telecommunications giant announced a strategic reset back in May.

Group CFO Arthur Lang expects India’s recently-announced reform package to significant improve Airtel’s liquidity.

By doing so, it will allow Airtel to have the financial bandwidth to invest to build up its digital capabilities.

Airtel’s rights issue is, however, subject to regulatory approval.

Investors should feel reassured that Singtel is prepared to go all the way in supporting Airtel’s ambition to become a world-class telco.

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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.

The post Top Stock Highlights of the Week: StarHub, Sembcorp Marine and Singtel-Bharti appeared first on The Smart Investor.

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