STARHUB LTD
CC3.SI
StarHub Ltd - KEEPS FY16 GUIDANCE; BUY
- NPAT met 25% of FY16 estimate
- Maintains FY16 guidance
- Expected 18% total return from here
1Q16 earnings better than expected
- StarHub Ltd reported a better-than-expected set of 1Q16 results.
- Revenue slipped 4.4% YoY to S$590.4m, meeting about 24% of our full-year forecast, mainly due to lower revenue from the sale of equipment.
- And as StarHub also sold more low- to mid-end models, this led to a 19.7% slide in cost of sales and a 9.1% fall in operating expenses; as a result, EBITDA rose 13.2% to S$183.4m, while net profit jumped 25.9% to S$92.8m (or 25% of our FY16 estimate).
- StarHub declared a quarterly dividend of S$0.05/share as guided.
Kept FY16 guidance unchanged
- Although service EBITDA margin hit 33.8% in 1Q16, versus 30% in 1Q15, management has kept its 31% guidance for the full-year, suggesting that the first quarter numbers may not be indicative of the performance for the rest of the year.
- Nevertheless, management expects service revenue to continue to grow in the low single-digit range, likely supported by its broadband and enterprise businesses.
- It has also kept its capex payment for this year at 13% of total revenue, excluding the S$80m spectrum payment due in Sep.
- Lastly, there is no change to its annual dividend of S$0.20/share, or S$0.05/quarter.
Mixed outlook for mobile business
- For its main mobile business, StarHub expects the SIM-only plans and the new data upgrade service at a low monthly fee to contribute to a lower subscription and excess data usage revenue; but it still expects monetisation of mobile data from growing data usage and take-up of other value-added services.
- It also plans to participate in the upcoming spectrum auction in 2H16. However, it is likely to face increased competition sooner-than-expected, with Circles.Life releasing more details about its pricing plans last night.
Maintain BUY with new S$3.69 fair value
- In light of the recent developments, we have revised our FY16 and FY17 estimates slightly and lowered DCF-based fair value from S$3.80 to S$3.69.
- But as there is still a total potential return of nearly 18% from here, we maintain our BUY rating.
Carey Wong
OCBC Securities
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http://www.ocbcresearch.com/
2016-05-06
OCBC Securities
SGX Stock
Analyst Report
3.69
Down
3.80