Financial Analysis of StarHub Limited and SingTel Limited

This assignment analyzes the financial strengths and market positions of StarHub Limited and SingTel Limited. It includes an analysis of their income statements, balance sheets, and cash flow statements.

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Table of Contents
Introduction......................................................................................................................................3
Financial Analysis...........................................................................................................................4
Income statement.........................................................................................................................4
Balance sheet...............................................................................................................................6
Cashflow statement......................................................................................................................7
Altman Z-score................................................................................................................................8
Financial Strength............................................................................................................................9
Conclusion.....................................................................................................................................10
Reference List................................................................................................................................11
Appendix........................................................................................................................................12
Appendix 1.................................................................................................................................12
Appendix 2.................................................................................................................................12
Appendix 3.................................................................................................................................12

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Introduction
The following assignment has been undertaken to analyze the financial strengths and overall
market positions of the two communication companies, StarHub Limited and SingTel Limited.
The assessment of the financial statements such as the income statement, balance sheet, and cash
flow statement has been done. Following is a brief overview of both the companies.
StarHub Limited is a company that deals in info-communications and is a Singapore based
business (StarHub, 2018a). The company is primarily engaged in provision and operations of
telecommunication services and other businesses related to the industry of info-communications.
A wide range of information, entertainment and communication services are offered and
provided by the company for both corporate market as well as direct consumers (Bloomberg,
2018b). The products delivered by the company are Broadband, Paid television, mobile,
equipment sales and fixed network services on a network that is operationally integrated. The
mobile network that is operated by the company provides upwards of third generation (3G) and
fourth generation (4G) services to its customers (Reuters, 2018b). An island wide network name
as hybrid fiber coaxial (HFC) network is also managed by them which mainly deliver cable
broadband and television services (Reuters, 2018b). A wide range of business as well as home
multimedia content and services are offered and provided by the company.
SingTel Limited is a company in Singapore dealing with communication services. It is the
official communication arm of the Singapore government. The primary engagement of the
company is in the provision and operations of telecommunication services and systems as well as
investment holdings (SingTel, 2018a). Additionally, the company also offers internet services
and holds license rights and frequency spectrum for installing, operating and maintaining mobile
communication services and systems which include wireless broadband services and systems
(Bloomberg, 2018a). The company mainly operates in three segments, group enterprise, group
consumer and group digital life. The group consumer segment is comprised of consumer
business across countries such as Australia and Singapore, as well as the investment of the
company in countries such as India, Thailand, South Asia, Africa, Indonesia and Philippines
(Reuters, 2018a). The group enterprise segment is comprised of the business groups across

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countries such as Australia, Singapore, the United States, Europe and other regions. The focus of
the group digital life segment is on usage of the internet assets and technologies of the firm's
operating enterprises by entering the neighboring businesses. In terms of market capitalization,
SingTel is the second largest company to be listed in the Singapore Exchange, and is majorly
owned by the Singapore government company, Temasek Holdings.
External Comparison
SWOT
SingTel
Strength
The company has a mobile network of the next generation. It has availability of regional
associates and its enterprise business has a very strong performance.
Weakness
The business of the company is largely dependent upon the market of Singapore and the revenue
generated from mobile business of the company in Australia is decreasing.
Opportunity
The company needs to harvest the Asia Pacific region and other areas. It has a huge opportunity
of capitalizing into the broadband services and mobile data. The firm also has a huge potential of
growth in the associate markets.
Threat
One of the greatest threats to the company is possibility of changes and alterations due to
regulations. It is subject to a very high competitive pressure.
StarHub
Strength

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StarHub is strong in certain areas such anticipating changes realted to its products and services. It
has a 24 hours customer service which provides them a competitive advantage and its club
member scheme also enables it to lead in the communication market.
Weakness
The strength of the company which is adaptation of ideas to service, demands more. As such,
this strength become weakness of the company. StarHub focuses more on the new customers
rather than existing ones.
Opportunity
The company has a great opportunity of improving its services due to the everyday improvement
in the technology. Another opportunity is improving its performance by the means of interaction
with its customers.
Threat
The only threats to the firm’s business are its market competitors such as Mobile One and
SingTel.
PESTLE
SingTel & StarHub
Since both the companies are operating in Singapore, their PESTLE would be the same.
Political
There are many Government holdings in Singapore.
Economical
According to recent reports, there have been many change in the habits of consumer spending
and income. During the times of economic downturn, customer friendly services are provided to
consumers.
Social

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The economy of Singapore is characterized by several Social development programs.
Technological
The modern technology provides many solutions for various industries. The companies and
businesses of Singapore are always upto date in terms of technology. The digital strategies of the
companies are revamped.
Legal
There is a fury online which is going on in the country related to price charges over free
applications. Some businesses are charging money for the applications which are supposed to be
free. There have also been reports of legal actions against the smear campaign.
Environmental
There have been initiatives of environmental management taken by enterprises and corporations.
The people trhe government of the country focuses on conservation of water and they have also
implemented certain green networks.
Financial Analysis
Income statement
COGS
The cost of goods sold of StarHub Limited for the three months ended in the month September
2018 to be 190 million (StarHub, 2018b). The cost of goods sold for the company for the trailing
twelve months which ended in the month September of the financial year 2018, was recorded to
be 818 million. On the basis of gross margin, there is a direct link between the profitability of the
company and its cost of goods sold. The gross margin percentage of the company for the three
months ended in September 2018 was recorded to be 55.32%. The cost of goods sold of StarHub
Limited was also directly linked with its inventory turnover. The inventory turnover of the
company for the three months ended in September 2018 was recorded to be 5.71.
The cost of goods sold for the three months which ended in September 2018, of SingTel
Limited was 0 million (SingTel, 2018b), it means no COGS was recorded. The cost of goods
sold for the trailing twelve months of the company was also 0 million. The gross margin

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percentage of the company was 100%. Its inventory turnover for the three months which
ended in September 2018 was 0.00, meaning no records of inventory turnover.
EBIT
The EBIT which stands for Earnings before Interest and Taxes helps in measuring the profit of a
firm. This profit also includes all the expenditures of the company accept its income tax expenses
and the interests. The EBIT is the difference between the operating expenses and operating
revenues of a firm. If a firm is not available with any kind of non-operating income, then the
operating income of the company can sometimes be used as a synonym for its operating profit
and EBIT.
The EBIT of the StarHub Limited for the year 2018 stood to be 201 million. In the regular
definition, there is a direct link between the operating income or EBIT and the return on capital
of a company. The company's annualized return on capital percentage is recorded as 19.33%
(StarHub, 2018b). There is also a link between the EBIT and earnings yield. The earning yields
of the company were 7.68%.
The EBIT of the SingTel Limited for the year 2018 stood to be 3,136 million (SingTel, 2018b).
The company's annualized return on capital percentage is recorded as 4.87%. The earning yields
of the company were 6.86%.
Gross Profit
The gross profit of StarHub Limited for the year ended 2018 was 959 million. The gross margin
percentage of the company for the year 2018 was 55.32% (StarHub, 2018b). In the past 13 years,
the highest gross margin percentage of the company was recorded as 74.60% whereas the lowest
was recorded to be 53.95%. The company seems to have a durable competitive advantage.
The gross profit of SingTel Limited for the year ended 2018 was 12,892 million (SingTel,
2018b). The gross margin percentage of the company for the year 2018 was 100%. In the past 13
years, the highest gross margin percentage of the company was recorded as 84.28% whereas the
lowest was recorded to be 0%. The company as a durable competitive advantage and its gross
margin seems to be in a long-term decline.

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Net Income
The net income of the StarHub limited for the financial year 2018 was recorded to be 145 million
(StarHub, 2018b). There is a direct link between the net income and earnings per share of a
company. The earnings per share of StarHub Limited were recorded to be 0.24 for the year 2018.
The net income of the SingTel limited for the year 2018 was recorded to be 2,359 million. Its
Earning per share for the year 2018 was 0.30 (SingTel, 2018b).
Balance sheet
In financial accounting, the statement of financial position or a balance sheet of a company is the
summary of the financial balances of any organization or individual, whether it be a business
partnership a Commerce sole proprietorship, private limited company, a Corporation or any other
organization a such as a non-profit entity or government organization. It consists of the assets
and liabilities which are owned by the company of the individual, on which it is liable to
be back in the future.
Assets
The total Assets of StarHub Limited were recorded to be 1733 million for the year 2016,
whereas the same was 1918 million for the year 2018. This implies that there has been an
increase in the total assets which shows that the financial strength of the company has
improved from the last year and now it has better capabilities of paying off its
liabilities.There has been a growth rate of 17.50% in the total assets of the company for the past
1 year (StarHub, 2018b). The same was 5.20% in the last 3 years. There is a connection between
the total assets and the return on assets percentage. The annualized return on assets percentage of
the company for the year 2018 was 8.86%. The total assets also have a link with the revenue
through assets turnover. The company’s asset turnover for the year 2018 was 0.23.
The total Assets of SingTel Limited was recorded to be 34,571 million. There has been a growth
rate of -1.30% in the total assets of the company for the past 1 year. The same was 4.80% in the
last 3 years (SingTel, 2018b). The annualized return on assets percentage of the company for the
year 2018 was 5.56%. The company’s asset turnover for the year 2018 was 0.09.
Liabilities

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The total liabilities of StarHub Limited for the year 2018 stood to be 1,440 million (StarHub,
2018b). A decline has been seen in the total liabilities of the company from March to June of the
financial year 2018, and June to September in the same year. The last increase in the total
liabilities of the firm was seen back in December 2016 to December 2017. The increase was
approximately of 997 million.
The total liabilities of SingTel Limited for the year 2018 stood to be 13,509 million. A decline
has been seen in the total liabilities of the company from March to June of the financial year
2018, but there was an increase in the same from June to September in the same year (SingTel,
2018b). The last increase in the total liabilities of the firm was seen back in March 2016 to
March 2017, which again declined from March 2017 to March 2018.
Cashflow statement
In general, financial accounting, financial statements which shows how the changes in the
income statement and the balance sheet accounts of a company impacts its cash and cash
equivalents, is known as a cash flow statement. The cash flow statement is broken down showing
an analysis of operating, investing and financing activities of the company, and it is also known
as a statement of cash flows.
Cash flow from discontinued operations
The cash flow from the discontinued operations of a company is basically the amount of cash
which a company receives which is generated from the sale of part of the business.
The cash flow from discontinued operations of the StarHub Limited was 10 million for the year
2018 (StarHub, 2018b).The figure has been taken as according to the numbers provided in their
financial statements. This figure is the balance which has been generated due to sale in of the
part of its business.
The cash flow from discontinued operations of SingTel Limited for the financial year 2018 stood
to be million (SingTel, 2018b).
Financing activities
The cash that is generated or spent from the financial activities like repayment, buyback and
dividends paid to common shareholders, is known as cash from financing activities.
The cash flow from financing activities of StarHub Limited stood to be -230 million for the year

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2018 (StarHub, 2018b).
The cash flow from financing activities of SingTel Limited stood to be -2,293 million for the
year 2018 (SingTel, 2018b).This amount incurred because the company has spent money on
paying back its liabilities, paid dividends to shareholders and undertook buyback shares.
Investing activities
The cash which is gained or spent by a company in investment activities in the operating
subsidiaries as well as the financial market is covered by the cash flow from investing activities.
The cash flow from investing activities of the StarHub Limited stood to be -250 million for the
year 2018 (StarHub, 2018b).
The cash flow from investing activities of SingTel Limited stood to be -1,922 million for the
year 2018 (SingTel, 2018b).
Operating activities
The amount of cash which is brought in by the normal operations of a company's business is
known as the cash flow from operations. It is the cash flow which comes before the financing
and investment activities and is the cash version of the net profit.
The cash flow from operations of StarHub Limited stood to be 327 million for the financial year
2018 (StarHub, 2018b).
The cash flow from operations of SingTel Limited stood to be 4,240 million for the financial
year 2018 (SingTel, 2018b).The day to day operations of the business of the company has led to
this figure to arise. For instance, costs of overhead, expenses in purchases, etc.
Net Income from continuing operations
The amount of net income which is brought in by a company from the ongoing activities of its
business is indicated by the net income from continuing operations of the company. These
activities are expected to be carried forward into the next financial period.
The net income from continuing operations of StarHub Limited for the financial year 2018 was
179 million (StarHub, 2018b).
The net income from continuing operations of SingTel Limited for the financial year 2018 was
recorded to be 2,876 million (SingTel, 2018b).

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Altman Z-score
There are three zones of discrimination in the Altman Z-score. If the Z score is less than 1.81, a
company is considered to be in the distress zones. If the same is greater than 2.99, a company
would be considered to be in the safe zones. Finally, when does the score of the company is
between 1.81 and 2.99, the company can be considered to be in the grey zones.
The Altman Z-score of StarHub Limited was recorded to be 2.41 as of 2018. It indicates that the
company is currently in the grey zones. This implies that, there is some kind of financial stress
which the company is going through. If the score falls below 1.81, there are chances for the
company to face bankruptcy risk
The Altman Z-score of the SingTel Limited was recorded to be 2.20 as of today. It indicates that
the company is currently in the grey zones. This implies that, there is some kind of financial
stress which the firm is going through. If the score falls below 1.81, there are possibilities for the
firm to face bankruptcy.
Financial Strength
The financial strength rank helps in measuring the strength of the financial situation of a
company. It is based on three factors, the interest coverage of a company, the dead to revenue
ratio and the Altman Z score. The higher the interest coverage, the better it is for the company.
The lower the debt to revenue ratio of a company, the better it is for the same.
The interest coverage of StarHub Limited for the year 2018 was 10.08. Its debt to revenue ratio
for the same here was recorded to be 1.68. Finally, its Altman Z score as of today, is 2.39. Its
financial strength rank was recorded to be 5.
The interest coverage of SingTel Limited for the year 2018 was 6.23. Its debt to revenue ratio for
the same here was recorded to be 2.50. Finally, its Altman Z score as of today, is 2.19. Its
financial strength rank is 5.

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Figure 1: Altman Z–score of SingTel
Profitability
The profitability rank demonstrates how profitable a business or entity can be and how likely the
business of a company which stay the same way. The profitability rank is based on some factors.
These factors are: the operating margin percentage, the Piotroski F-score, the trend of the
operating margin percentage, the consistency of the profitability and the predictability rank.
The operating margin percentage of StarHub Limited was measured to be 12.99%. Its operating
margin has been in a five-year decline. The F-score of the company is 5. It indicates that the
company's financial situation is typical for being a stable business.
The operating margin percentage of SingTel Limited as of 2018 was 13.46%. As of today, the F-
score of the company is 4.
Conclusion
It can be concluded that, both the companies are currently stable in the market and have a
competitive advantage. Both companies like in the grey zones which implies that StarHub
Limited as well as SingTel Limited are moderate in terms of profitability as well as risk. Both the
companies are going through some financial stress as shown by the Altman Z-score. However, in
comparison SingTel's operations and profitability is much larger than that of StarHub. Its
operating and profitability margin, generated revenues as well as expenditure are on a bigger
scale, since it is a large company than StarHub.

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Reference List
Bloomberg, 2018a. Company Overview of Singapore Telecommunications Limited. [online]
Available at: <https://www.bloomberg.com/research/stocks/private/snapshot.asp?
privcapId=112384> Accessed on: 11 Dec 2018.
Bloomberg, 2018b. Company Overview of StarHub Ltd. [online] Available at:
<https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=2264196>
Accessed on: 15 Dec 2018.
Reuters, 2018a. Singapore Telecommunications Ltd (STEL.SI). [online] Available at:
<https://www.reuters.com/finance/stocks/companyProfile/STEL.SI> Accessed on: 13 Dec 2018.
Reuters, 2018b. StarHub Ltd. (STAR.SI) [online] Available at:
<https://www.reuters.com/finance/stocks/companyProfile/STAR.SI> Accessed on: 17 Dec 2018.
SingTel, 2018a. About Us. Company Profile. [online] Available at:
<https://www.singtel.com/about-us/company/company-profile> Accessed on: 16 Dec 2018.
SingTel, 2018b. About Us. Investor Relations. [online] Available at:
<https://www.singtel.com/about-us/investor-relations/relations> Accessed on: 25 Dec 2018.
StarHub, 2018a. About Us. About StarHub. [online] Available at:
<http://www.starhub.com/about-us.html> Accessed on: 26 Dec 2018.
StarHub, 2018b. About Us. Annual Report. [online] Available at:
<http://ir.starhub.com/Investors/?page=Annual-Reports> Accessed on: 26 Dec 2018.

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Appendix
Appendix 1
Company
Particulars 2017 2016 2018 2017
Revenue 2400 2396 17531 16711
Operating expenses -2071 -2003 -12701 -11929
Profit from operations 333 425 5089 4997
Profit before tax 304 410 6131 4515
Profit for the year 249 341 5430 3831
StarHub SingTel
Income Statement
Appendix 2
Company
Particulars 2017 2016 2018 2017
Non-current assets 3121 3057 22060 21971
Current assets 561 441 2507 1893
Current liabilities -809 -691 1742 1888
Non-current liabilities 954 1074 1464 1717
Net assets 1918 1733 21361 20258
Total equity 1918 1733 21361 20258
Balance Sheet
StarHub SingTel
Appendix 3
Company
Particulars 2017 2016 2018 2017
Profit before tax 304 410 6131 4515
Net cash from operating actitvities 517 550 5955 5314
Net cash used in investing actitvities -327 -389 -1950 -4832
Net cash used in financing actitvities -130 -49 -4009 -422
Net change in cash and cash equivalents 60 111 -4 60
Cash and cash equivalents at beginning of year 285 173 533 461
Cash and cash equivalents at end of year 345 285 524 533
Cash Flow Statement
StarHub SingTel