Hot stock: StarHub jumps 6.8% on M1 general offer

SHARES in local telco StarHub surged by almost 7 per cent on Thursday to reach the highest it has been in 16 weeks. This came on the back of news that Keppel Corp and Singapore Press Holdings (SPH) are seeking a majority stake in rival telco M1, in a deal which values the telco at over S$1.9 billion.

As at 1.08pm on Thursday, the counter was trading at S$1.89 apiece, up 6.8 per cent, or 12 Singapore cents.  

Keppel and SPH have offered to purchase the remaining shares in M1 that they do not already own at S$2.06 per share, or a 26 per cent premium over the stock's last closing price.

SPH has a 13.45 per cent stake in M1, while Keppel has 19.7 per cent through Keppel T&T, according to data from Reuters. Both companies and their related parties have a deemed interest of 33.27 per cent in M1, which has a market cap of S$1.51 billion.

UOB Kay Hian analyst, Jonathan Koh told The Business Times, which is owned by SPH, on Thursday that the latest merger and acquisition (M&A) involving M1 has rekindled interest in the telco sector, which has been "bombed-out" or oversold previously, and that this could be the "start of better things to come for the sector".

Shares of Singtel, Singapore's biggest telco, rose 1.6 per cent to S$3.24.

UOB Kay Hian has issued a "buy" recommendation on StarHub, with a target price of S$1.92.

"Execution has improved since Peter Kaliaropoulos took over as CEO on July 9. Within two months of his appointment, StarHub has scaled up in cybersecurity with the merger of Accel Systems & Technologies with Temasek's Quann World to form Ensign InfoSecurity," Mr Koh highlighted in a research note on Sept 25. 

Separately, Goldman Sachs has issued a "neutral" recommendation on StarHub with a target price of S$1.90, while HSBC has a "hold" rating on the counter, with a target price of S$1.65.