STARHUB LTD
CC3.SI
Better EBITDA margins
- 2Q15 core net profit rose 34.5% qoq (-5.1% yoy) on higher service revenue and EBITDA margin, after 1Q15 was dragged by high handset subsidies.
- The results were largely in line, with 1H15 at 45% of our FY15 forecast (consensus: 47%), as 2H15 should be stronger.
- As expected, a quarterly DPS of S$0.05 was declared.
- Maintain Hold with an unchanged DCF-based target price S$3.80 (WACC: 7.1%).
- We see a decent outlook for its mobile and fixed network businesses, while its broadband business should stabilise this year.
- However, we do not expect it to raise its annual DPS or pay special dividends in FY15-17 due to high capex and spectrum payments.
- A potential fourth mobile operator could also put pressure on ARPU upon its entry in mid-2017.
Broadband revenue improving sequentially
- Broadband revenues inched up 1.9% qoq (-3.9% yoy) in 2Q15, the second consecutive qoq growth.
- This was driven mainly by 0.4% growth in subscribers, while ARPU was stable at S$33.
- Given the significant price adjustments made last year and current competition centred around higher-speed packages (e.g. 1Gbps for S$49/month), we believe that ARPU has bottomed out at the current levels.
- We forecast broadband revenue to fall by 3.8% yoy in FY15 before recovering 3.1%/1.5% yoy in FY16/17.
Prepaid weakness offsets postpaid gains yoy
- Mobile revenues rose by 1.8% qoq after a seasonally weak 1Q15.
- It was largely flat yoy as postpaid growth was offset by a decline in prepaid, which continues to be impacted by reduced International Direct Dial (IDD) calls and SMS volumes.
- For postpaid, subscribers grew by 0.9% qoq while ARPU rose by 2.9% qoq.
- Subscribers on tiered pricing plans rose by 1% pts qoq to 63%, while 22% of these users exceeded their data bundles (1Q15: 22%).
- We forecast mobile revenues to grow by 2.2%/2.2% yoy in FY15/16 before easing 0.5% yoy in FY17, due to the initial impact from the entry of a fourth mobile operator.
EBITDA margin rebound on drop off in device sales
- EBITDA margin (on service revenue) rebounded by 5.1% pts qoq (+1.1% pts yoy) to 35.1%.
- Handset subsidies eased off after the high re-contracting activities in 1Q15 due to strong demand for the iPhone 6.
- We expect the EBITDA margin to reach 34.3%/33.9%/34.3% in FY15/16/17 as StarHub gradually lowers handset subsidies.
FOONG Choong Chen CFA | http://research.itradecimb.com/ CIMB Securities 2015-08-06
3.80
Same
3.80
