Shares & Derivatives
Just How Leveraged is Starhub?
By InvestingNook  •  May 29, 2015
Starhub is well-known among retail investors for its high dividend yield. However, its brand name and dividends belie the extent of credit risk. Here is our attempt at wrapping our heads around Starhub’s degree of leverage.

Starhub’s ROE is 249%

To first get a sense of how leveraged Starhub is, one can look to its insanely high return on equity (ROE). Typically, ROE of above 20% is considered impressive. Starhub’s 249% in its last financial is way above the curve and in 2011, its ROE was 1396%. How does ROE related to the degree of leverage? The answer lies in the Dupont analysis which breaks down ROE into 3 constituents:

ROE = Profit Margin x Asset Turnover x Leverage

Simply put, the higher the leverage employed by a company, the higher the ROE will be, assuming profit margin and asset turnover remains constant. The crucial thing is that the degree ......
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By InvestingNook
As Co-Founder and Fund Manager of Heritage Global Capital Fund, we started InvestingNook as a website dedicated to sharing the knowledge of value investing – allowing our readers achieve an edge over the markets with the knowledge of value investing.
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