Specuvestor, I get you. (I understand well...)
Free cash flow is a financial modelling until forever (or just take from the analysts in good faith until time to revise) while earnings may fluctuate from year to year, like an analyst's projection from DMG for King Wan to be able to pay dividends for the next several years based on retained earnings in previous years (whereas future earnings might be less predictable still than for a telecommunications company).
(06-08-2014, 12:24 PM)specuvestor Wrote: [ -> ]Starhub has negative consolidated reserve due to goodwill in SCV. That's why on a holding company basis it looks ok.
Since our discussion below, IMHO it is clear the moat is slowly but surely eroding.
On cashflow basis we also have to be very careful as the dividend payment depends on no surprises on the FCF as it is very tight so no margin of error. Stecano should also understand that FCF is different from Earnings.
(11-05-2013, 03:59 PM)CityFarmer Wrote: [ -> ] (11-05-2013, 11:42 AM)specuvestor Wrote: [ -> ] (09-05-2013, 11:08 PM)LLI Wrote: [ -> ]Hi, I am new to starhub, why is the NTA of the company so low?
IIRC it is related to the acquisition of SCV
I often quote starthub as an example of how to value a company using cashflow and ROIC rather than PTBV or ROE. These latter 2 numbers look ridiculous on starhub 
The main asset of "SCV" had been the "pipe" ie a captive market once signed on. Mio presence has already diminished that moat. Smart TV and internet streaming via fiber for eg Youtube's pay TV will further erode that competitive advantage. The question as always is how long it can drag. Impact on Starhub's pay TV had been minimal until last year.
The uniqueness of Starhub's equity after SCV acquisition had been discussed in detail in this thread. Probably a search will able to get the detail of the discussion.
(07-08-2014, 12:45 AM)tikam tikam Wrote: [ -> ]Specuvestor, I get you. (I understand well...)
Free cash flow is a financial modelling until forever (or just take from the analysts in good faith until time to revise) while earnings may fluctuate from year to year, like an analyst's projection from DMG for King Wan to be able to pay dividends for the next several years based on retained earnings in previous years (whereas future earnings might be less predictable still than for a telecommunications company).
(06-08-2014, 12:24 PM)specuvestor Wrote: [ -> ]Starhub has negative consolidated reserve due to goodwill in SCV. That's why on a holding company basis it looks ok.
Since our discussion below, IMHO it is clear the moat is slowly but surely eroding.
On cashflow basis we also have to be very careful as the dividend payment depends on no surprises on the FCF as it is very tight so no margin of error. Stecano should also understand that FCF is different from Earnings.
(11-05-2013, 03:59 PM)CityFarmer Wrote: [ -> ] (11-05-2013, 11:42 AM)specuvestor Wrote: [ -> ] (09-05-2013, 11:08 PM)LLI Wrote: [ -> ]Hi, I am new to starhub, why is the NTA of the company so low?
IIRC it is related to the acquisition of SCV
I often quote starthub as an example of how to value a company using cashflow and ROIC rather than PTBV or ROE. These latter 2 numbers look ridiculous on starhub
The main asset of "SCV" had been the "pipe" ie a captive market once signed on. Mio presence has already diminished that moat. Smart TV and internet streaming via fiber for eg Youtube's pay TV will further erode that competitive advantage. The question as always is how long it can drag. Impact on Starhub's pay TV had been minimal until last year.
The uniqueness of Starhub's equity after SCV acquisition had been discussed in detail in this thread. Probably a search will able to get the detail of the discussion.
there are companies that like to cite that they can pay dividends because they have retained earnings.
if you do not have the operating nature of cash flow or earnings, the retained earnings actually comes out of DEBTs. Second chance comes to mind (not my words but the CEO when i asked)
FCF is not forever.unless you buy the idea that in this industry, future capex is cheaper than older capex. eventually earnings is sound because dep = capex over the long term.
(07-08-2014, 12:45 AM)tikam tikam Wrote: [ -> ]Specuvestor, I get you. (I understand well...)
Free cash flow is a financial modelling until forever (or just take from the analysts in good faith until time to revise) while earnings may fluctuate from year to year, like an analyst's projection from DMG for King Wan to be able to pay dividends for the next several years based on retained earnings in previous years (whereas future earnings might be less predictable still than for a telecommunications company).
Free Cash Flow (FCF) is a financial modelling? I reckon you might mistaken it with Discounted Cash Flow (DCF)?
Sustainability is the key in our context. IMO, the only way for sustainable dividend payout is from recurring earnings or FCFs.
(not vested)
When we talk FCF we are trying to figure out the REAL money... Earnings is accounting money
We get our dividends in REAL money, unless it is stock dividend etc which we will have to further analyse why.
However accounting earnings is important because unless you are REIT, you cannot pay out dividends if you have no retained earnings to pay out from. So that's another thing to watch out for but Starhub Holdco has $661.3m retained profits so not a short term issue for the Holdco but the subsidiary need retained profits to pay upwards, which the group has $76.7m.
By the way i no accountant. What i understand is that EPS has different quality. A high EPS does not mean the company really earn that money and can be easily convert into cash in bank for us to withdraw. There is a lot of "gimmick" involves to get that EPS number and may never get realized.
FCF/Share ideally should near EPS long term. However FCF is real money that keeps the company going. Much harder to bluff me.
i not even properly educated, but i read FCF can be like PE also. FCF can be juggled about also.
Growth in retained earnings means the company is growing its net worth, a rough indicator of growing intrinsic value.
Starhub has had consistent -ve retained earnings last few years, while carrying significant debt compared to equity.
This implies few dangers - eroding competitive advantage, accumulated losses, dividends being paid thro debt.
Telco is a high-capex, low-margin, highly-competitive biz which perhaps is best avoided.
Dividend yield is the only attraction, but it can be hit anytime, by high debt, poor management, tech shifts...
(07-08-2014, 01:40 PM)Temperament Wrote: [ -> ]i not even properly educated, but i read FCF can be like PE also. FCF can be juggled about also.
True. The best way is to show me the money.
Starhub basically gives to the brink to proof that ? They can stop paying dividends for 1.5 years and be debt free theoretically. Seems like cash cow business ?
(07-08-2014, 06:30 PM)corydorus Wrote: [ -> ] (07-08-2014, 01:40 PM)Temperament Wrote: [ -> ]i not even properly educated, but i read FCF can be like PE also. FCF can be juggled about also.
True. The best way is to show me the money.
Starhub basically gives to the brink to proof that ? They can stop paying dividends for 1.5 years and be debt free theoretically. Seems like cash cow business ?
i have come across this 1.5 years or 2 years free theoretically thing. So when are they going to do that? Will the 1.5 to 2 years thing become more and more years? i really can't understand their capital structure. It seems that Star Hup is using debt and very little equity to run the operation for years already.
It seems (as if) like someone will lend me money to do business all the time, why not?
Have not vested before. (Don't understand)
Starhub is a very interesting extreme case study on debt structure
Indeed they can repay their debt in 1.5 years if they choose not to pay dividends. In that case their equity will jump and debt goes to zero. ROE plunges while PTBV slides
Obviously the company is a cashcow that will not collapse. But will the share price collapse?
Asset and business didnt change but the structure change and shareholders are affected nonetheless
Or take the middle path and use ½ the FCF to retire debt instead of dividends to save interest cost. After 3 years go debt free. Will that be better for shareholders?