StarHub’s 2024 Financial Report Signals Strategic Shifts and Risk Factors That Could Move Share Price

Key Highlights from StarHub’s Annual Report FY2024

• Board Confidence: The Directors assert StarHub’s ability to pay its debts and confirm the financial statements present a true and fair view of the company’s position for FY2024.
• Financial Performance: The Group’s audited statements show robust oversight, with a focus on sustainability, governance, and strategic growth objectives.
• Dividend Payments: StarHub paid a final tax-exempt (one-tier) dividend of 3.2 cents per ordinary share, totaling S\$55.1 million, for the financial year ended 31 December 2024, with interim dividends planned for 2025.
• Share-Based Incentives: Performance share awards hinge on meeting or exceeding stretch targets, including TSR (Total Shareholder Return), ROIC (Return on Invested Capital), ESG metrics (emissions reduction, renewable energy use), and strategic transformation KPIs.
• Risk Factors: The report details risks that could materially affect StarHub’s share price, including regulatory changes, market volatility, benchmark rate reforms, interest rate and FX risks, cybersecurity threats, and liquidity concerns.
• Debt and Liquidity: As of 31 December 2024, StarHub managed S\$1,013.1 million in fixed-rate borrowings and S\$122 million in variable-rate borrowings, with a policy to keep at least 50% of long-term debt at fixed rates.
• Benchmark Reform: Ongoing international reforms to interest rate benchmarks (e.g., SORA replacing SIBOR) may affect coupon rates and market pricing for StarHub’s debt securities.
• Sustainability Commitments: New share plan targets include reduction of Scope 1 and 2 emissions and increased energy use from renewable sources, aligning incentives with ESG outcomes.
• Auditor’s Confirmation: KPMG confirms the accuracy of financial records and independence, highlighting no material misstatements or deficiencies for FY2024.
• Related Party Transactions: The Group reported notable transactions with SembCorp Industries, Singapore Power, Singapore Airlines, and Singapore Technologies Engineering, totaling S\$4.6 million for H1 2025.

Strategic Developments and Potential Price-Sensitive Issues

• Performance Share Plan Enhancement: From FY2024, StarHub’s share awards are conditional on achieving not only financial metrics but also sustainability targets. This direct link between ESG performance and executive incentives marks a strategic pivot towards responsible investing, potentially attracting new institutional investors focused on sustainability.
• Benchmark Rate Risk: StarHub’s notes and perpetual securities are exposed to ongoing reforms of interest rate benchmarks. The transition from SIBOR to SORA and global LIBOR phase-outs may impact the pricing, liquidity, and yields of StarHub’s listed and unlisted debt instruments. Investors should closely monitor regulatory developments, as adverse changes or discontinuities could impact both debt servicing costs and market valuation.
• Liquidity and Market Risk: StarHub highlights the possibility of limited liquidity in its securities, especially those bespoke for particular investor categories or referencing relatively new risk-free rates. This could lead to increased price volatility, especially in periods of market stress or regulatory change.
• Interest Rate and FX Exposure: The company’s debt structure includes both fixed and variable rate borrowings. Rising interest rates or adverse currency movements (especially USD-SGD) could impact interest expenses and net income, which in turn may affect dividend payouts and share price.
• Cybersecurity and Data Protection: StarHub flags risks from potential breaches and regulatory sanctions as material threats to its business and brand equity, a growing concern for investors as global cyber risks escalate.
• Regulatory and Taxation Risks: Changes in Singapore’s tax regime, particularly around qualifying debt securities (QDS), as well as compliance with new accounting standards, could affect StarHub’s reported earnings and investor returns.
• Share Buybacks and Capital Management: StarHub maintains flexibility to repurchase shares, primarily for fulfilling share plan obligations. While not a defined buy-back plan, any substantial buyback activity could influence share supply and market pricing.

What Shareholders Need to Watch

• Dividend Continuity: The payment of a S\$55.1 million dividend for FY2024 underscores StarHub’s ongoing commitment to shareholder returns. Changes in payout ratios, however, could occur if profitability is affected by any of the risks flagged above.
• ESG Integration: Share-based awards now require not only financial performance but also tangible sustainability achievements. Failure to meet these targets could limit executive rewards, potentially signaling underperformance to the market.
• Debt Repricing and Benchmark Risk: Investors in StarHub’s debt instruments should be alert to changes in reference rates and the possibility of less favorable fallback rates or adjustment spreads, which may affect future yield and market value.
• Regulatory Environment: Any unexpected changes in Singapore’s tax treatment of debt securities, or heightened scrutiny from the Monetary Authority of Singapore or other regulators, could have material effects on StarHub’s cost of capital and distributable income.
• Liquidity and Trading Risk: Some StarHub securities may lack a robust secondary market, increasing risk for holders needing to sell in distressed market conditions.
• Related Party Dealings: While related party transactions are disclosed and within mandate, any material changes or disputes could be scrutinized by investors and regulators.

Conclusion: Share Price Sensitivity and Forward-Looking Risks

StarHub’s 2024 report is rich in detail and reveals several areas of strategic evolution that could materially affect both share and debt security prices. The company’s increased focus on sustainability-linked incentives and its exposure to benchmark rate reforms and market risks are particularly important for investors to monitor. Any adverse developments in these areas, or failure to meet newly established ESG or financial targets, could result in heightened share price volatility or changes in dividend policy.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult with professional advisers before making any investment decisions. The information is based on the StarHub Ltd Annual Report 2024 and is subject to change without notice. The author does not guarantee the accuracy or completeness of the information provided.

View StarHub Historical chart here