What made StarHub a 'vulnerable' stock lately

Share price dropped around 15%.

According to OCBC, StarHub Ltd saw a sharp drop in its share price after they downgraded their call from Hold to Sell on 10 May following its 4Q12 results announcement; note that it had also lowered its revenue growth guidance from single-digit to low single-digit while maintaining its EBITDA margin on service revenue at 31% (versus 33% in 1Q13). 

Since then, the share price has fallen some 15% from S$4.72 to a recent low of S$4.01. 

Here's more from OCBC:

However, we note the stock price has outperformed not only its peers but also the STI – and this outperformance was mainly driven by investors searching for yield.

In our view, we do not see this as sustainable as this has made valuations pricey and the yield had also fallen to some 4.2%.

And this made it “vulnerable” should the yield compression story falter. We were also concerned by the possibility of seeing a flight of out of the more defensive counters like telcos should investors take a more “risk on” approach.

On hindsight, it appears that we were correct on both counts.