Starhub Essay

1958 Words8 Pages
1. BOOK VALUE AND MARKET VALUE PER SHARE StarHub’s book value per share fell by nearly 60%, from 3.15 cents in 2010 to 1.32 cents in 2011. While this may make StarHub appear less attractive to investors, the fall in book value is mainly attributed to the large fall of $31.4 million in shareholder’s equity, which resulted from lower retained profits after distribution of dividends. StarHub’s market value per share as at 31 December 2011 was $2.91. Over the last year, its share price has risen from $2.63 to $2.91 and there are no signs of slowing down in its growth. This could be due to investors having strong confidence in the future of StarHub. Comparing StarHub’s book value with its market value, we would consider StarHub’s shares to be overvalued because the market is willing to pay more per share than it is worth. 2. REASONS WHY STARHUB’S MARKET VALUE OF EQUITY IS DIFFERENT FROM ITS BOOK VALUE OF EQUITY Future of Firm Not Reflected Book value of equity is determined by relating the original value of a firm's common stock adjusted for any outflows such as dividends and stock buybacks, and inflows of cash such as retained earnings to the amount of shares outstanding. It provides a snapshot of a firm's current situation, but considerations of the firm's future are not included in the book value. An example of this is StarHub’s first sustainability report included in the 2011 annual report, which has been prepared in line with the Global Reporting Initiative. After the release of this report, StarHub’s market value increased from $2.91 to $3.10 per share in three months. While it is prudent to not attribute entirely the growth of stock prices to this sustainability disclosure, studies have shown that release of sustainability-related information, such as carbon emission statistics, reaps benefits for the shareholders through the increase in stock prices

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