A Stock Analysis Report On Starhub Economics Essay

A Stock Analysis Report On Starhub economics EssayThe effect of the financial crisis in the year 2008 has adversely affected the stinting systems in the instauration causing liquidity in the credit foodstuffs to dry up and eventu completelyy resulted in many financial institutions facing insolvency issues. descentes around the world faced tough times in getting funds as banks became conservative in lending. Financial authorities around the world gum olibanum took measures in a bid to control the wide spread of the crisis to quash the impacts. capital of capital of capital of capital of capital of capital of capital of Singapore was not spargond in the crisis too and now sees massive funds, financial policies and fiscal plans being apply to ease the situation.In 2009, Singapores GDP diminish by 7.5% from a ingathering order of 21.7% in the post-crisis bounce Q2 to 14.2% in Q3. However, there were increasing shortens of recovery in Q3, showing an expansion of each(prenom inal) heavenss in the rescue. This reflected a better-than-expected outcome for Singapores GDP produce forecast for 2009 and has been revise upwards to surrounded by -2.5% and -2%, from -6% to -4%. The drop in un troth deposit out from 3.1% in 2005 to 2.2% in 2008 as shown in extension Table 2.1 too signals that the Singapore economy is recovering from economic slowdown.1.2 Critical Variables affecting Singapore economyWe rush identified several critical variables that crap significant impact on the Singapore economy. They ar namely, the monetary form _or_ system of presidency, fiscal policy, and external mints.1.2.1 Monetary insurance policyOne of the key initiative of MAS to ease the economy is adopting monetary policy works through manipulating the exchange rate to influence the economy to get low inflation and sustainable offshoot, taking into consideration the fact that the character of Singapores economy is toughenedly correlated because of the economys re liance on exports and the city-state imports virtually all of its needs which entrust be covered in section 1.2.5 Singapore Export. This resulted in MAS relying on the currency 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 decl areed its loose monetary policy zero per cent perceptiveness for the Sing dollar despite a modest recovery from corner since 2002 (CNA, 2009a). The maintaining of its relaxed monetary policy of zero per cent appreciation of the S$ evince policy band came about on October 10, 2009 (Bloomberg, 2009). This new policy is a complete U-turn of MAS stance when MAS called for a quicker exchange-rate appreciation to damp inflation six months ago. Strengthening the Sing dollar, which has been adopted by MAS since April 2004, is a coin to tame the increasing inflation as Singapores annual inflation rate has moved up to 7.5% in a new 26-year record hi gh-pitched (CNA, 2009b). However, inflation for the upcoming year is expected to fall with the increase in goodness prices.Although MAS Monetary insurance policy Statement does not state the land for the new policy except that the economy is deteriorating and inflation is on the exclude rapidly, we analyze that the new policy go forth assist Singapore exporters in the long run, and this will be covered under section 1.2.5 Singapore Export. This will encourage a strong twistth recovery in the upcoming year and we foresee that the Singapore economy will be favorable to investment despite the gloomy world economy originating from US recession. This is due to the fact that Singapore does not rely only on US but other handicraft partners from other nations.1.2.2 Fiscal PolicyOn the fiscal front, the government has been responsive to the evolving challenges confronting the Singapore economy and has enforced it broad force. Subsequently, with the on range of the global financial c risis and credit crunch, the government announced a $2.3 billion package towards the end of 2008 to loosen credit lines and help local crinklees discover 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 dutys, to address morphologic challenges, help viable companies stay afloat and intensify the economys long-term capabilities. For instance, the bodied income tax rate will be reduced from 18% to 17%, starting from YA2010, to boost competitiveness and attract investment to spur job creation. In addition, the government is alike pressing ahead with long-term investments in fundament, education and healthcare to make Singapore a world-class city. thus with these policies implemented, findth rate for Singapore economy is expected to aerodynamic lift only in 2010 (IRAS, 2009).1.2.3 InflationInflation occurs when demand exceeds supply, causing prices of goods and serve to rise. all over the years, the Singapores inflation rate has been 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 vermiform process Table 1.4 (Government of Singapore, 2009). The rise in inflation is mainly determined by higher food and institutionalize costs in Singapore. This leads to slower increase of the money supply in the economy as strong 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 distant investment raises asset-bubble worries (JakartaGlobe, 2009). A fall in inflation humbles 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 outlook of Singapores economy is closely linke d to global conditions which is the external trade performance. In other words, validating global economic developments would conjure up a healthy economy in Singapore. Singapores consumer price index (CPI1) is driven by external factors much(prenominal) as oil and food commodity prices which is determined by the growth of the world foodstuffs. Emerging commercialize economies, specially in Asia, keep on to recover strongly. For instance, Indonesia, Singapores fourth largest trading partner, with bilateral trade valued at S$75.1 billion saw a rise of 13 per cent from 2007 (Borhan. H., 2009). In addition, private-sector economists currently expect the US economy to expand by 2.7% in 2010, from a projected -2.4% this year, adding moreover to the glittery outlook of the export markets.1.3 Forecast for Singapore EconomyWe expect that the growth in the first and second quarters in 2010 is likely to be moderated, taking in the fact that exportation is expected to remain depresse d. However, in the triplet quarter onwards, we analyse that the economy will shift towards positive as a result of the stimulative policies implemented by the governments of its trading partners. The Singapore economy will thus ride on this oscillate of economic recovery and progression. In addition to this is the fact that MAS will continue to be vigilant over the progress of the economy and has implemented a series of policies.With the continued implementation of the S$SNEER policy, it will further strengthen Singapores export markets, encouraging an increase in its export order due to cheaper goods from Singapore. Furthermore, the resilience package which the government delivered will continue to disembowel positive effects 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 selective information communion IndustryWe have selected info conference manufacture as the labor suitable for investment. Over the years, the infocomm pains has greatly enhanced Singapores competitiveness by raising productivity and transforming channel processes.2.1.1 Defensive IndustryWe have indentified infocomm labor as a justificative fabrication. Telecommunication and internet receiptss are an integral part of business operation and will still be required 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 greet 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 publicize competition among existing players and create opportunities for new market freshmans. Following that, hulky companies like StarHub and M1 w ere awarded licenses to set up telecommunications operations in Singapore (IDA, 2000). This leads to a transition of the market structure from monopoly previously dominated by SingTel to oligopoly.Singapores selective information-communication industry is dominated by three major companies namely, SingTel, MobileOne (M1) and StarHub. Currently, SingTel holds the number one amaze with a 46.4% market share. StarHub came in second with 27.9% market share trance MobileOne stands third with 25.7% market share as of 2008 (IR Market Research Corp, 2009). Since a large percentage of the market is holdn up by these firms, they head for the hills 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 meshwork surgical processSingapores info communication industry is one of the key ratifiers to the Singapore economy. From Appendix Chart 2.2, we infer that the overall infocomm industry go through a stag e of constant growth during the period of 2004-2008. The revenue of the industry has been forever increasing from $34.77 billion in 2004 to $58.10 billion in 2008. This represents 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 home(prenominal) 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, Singapor es 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 working on creating demand and opportunities to enhance competition and sustain growth in the infocomm industry through sententious 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 co mpanies (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 export 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 potential 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 ascertain the demand of businesses and citizens through increasing business efficiency (IDA, 2009c). To promote legal competition, IDA has also recently released new advisory guidel ines which obligates major brisk operators such as SingTel, StarHub and M1 to cease the fixed early termination charges on customers who sign on mobile contracts for no longer than three months and terminate originally the end of their contract with effect on 1 March 2010. This would mean higher competition between firms in the upcoming year which would advocate in the growth of the industry (IDA, 2009e).2.3 Porters Competitive Forces Model2.3.1 Rivalry among lively 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 inviting 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 pleasant price. In addition, SingTel and M1 are also offering rewards such as periodical bill rebates to promote loyalt y from existing trainrs 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 occasion 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 negotiate 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 honorarium a fixed price plan set by the mobile provider. Thus, even if there is a price cut, it is well-nigh likely caused by competition within the industry rather than custom ers 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 orchard apple tree 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 upstart EntrantsThe ownership o f 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 opportunities for new market entrants. However, since most citizens already own at least 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 bane 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 hard 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 maintain 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 prize 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 declination 20, 2009 from http//www.iesingapore.gov.sg/wps/portal/WCMPreview?WCM_GLOBA L_CONTEXT=/wps/wcm/connect/My+Portal/Main/Past+Events/Islands+of+optimismBusiness Wire. (2009, tremendous 12). Research and markets Singapore key statistics, telecom market and regulatory overviews. Retrieved celestial latitude 15, 2009, from LexisNexis Academic data tight.BuySingapore. (n.d.). Singapores infocomm technology (ict) industry. 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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