StarHub shares surge after news of Keppel-SPH bid to buy out rival M1

StarHub retail store at Singapore’s VivoCity mall; taken September 2018.StarHub retail store at Singapore’s VivoCity mall.

StarHub shares surged on Thursday, trading up 6.78 percent at S$1.89 by 1:34 P.M. SGT, after Keppel Corp. and SPH said they were tying up to make a bid for all of the shares of rival M1.

“It’s in tandem with perceived value of M1,” a trader who declined to be named told Shenton Wire via email.

The bid for M1 was set at S$2.06 a share, a premium of 26 percent to the last traded price of S$1.63 on Friday of last week. M1’s shares were halted on Monday before the market open.

M1 had been trading at a price-to-earnings ratio of 11.05 times, according to SGX data, with the offering price suggesting a solid premium from that level.

To be sure, SGX data showed that StarHub was trading at a higher 14.25 times price-to-earnings ratio as of Wednesday’s close. That was after StarHub shares had fallen more than 40 percent from the start of the year through Friday. The shares have trended upward since M1 shares were halted Monday.

But the bid for M1 may have improved sentiment on Singapore’s telco sector, which has faced tough competition. StarHub has seen its mobile revenue fall and its pay TV business has shed subscribers amid competition from new players, such as Netflix.

However, with Keppel and SPH signalling a years-long period of “business transformation” ahead for M1, it could signal less focused competition for StarHub.

In addition, it offered fresh signs that Singapore’s domestic-focused telcos weren’t just passively waiting for disruption and competition to eat their lunches. Keppel and SPH said they plan to use majority control to seek new markets for M1 and appeared likely to aggressively re-jig its operations.

StarHub has also seen signs of fresh direction: The telco’s new CEO Peter Kaliaropoulos only took the helm in July after the position was vacant for a couple months.

Another potential reason for the rise: Earlier this week, UOB KayHian said that it expected Singapore’s telco market could consolidate back down to three players from the four it will have after TPG Telecom begins service in the city-state, which is expected by the end of the year.

UOB KayHian speculated that StarHub could acquire either M1 or TPG Singapore, once it launches its services, but it also noted that M1 and TPG Singapore could consider combining at some point.

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