STARHUB LTD
CC3.SI
Starhub - Buys Into A Cyber Security Outfit
- StarHub has announced the acquisition of a 51% stake in cyber security solutions provider, Accel Systems Technologies Pte Ltd (ASTL), from Accel Frontline Ltd, an India-based IT services provider for SDG19.38m.
- The strategic acquisition is likely to strengthen the company’s cyber security portfolio and capabilities, allowing it to offer end-to-end cyber security solutions and services. The all-cash deal is expected to be completed by mid-June.
- Maintain our NEUTRAL recommendation with a SGD2.70 TP (0% downside).
What we think
- The acquisition is most timely to capitalise on the growing threat of cyber-attacks globally. It also comes hot on the heels of the WannaCry ransomware attack, which has impacted more than 150 countries including key assets of government agencies and enterprises.
- Starhub’s deal and transaction value is small when compared to Singtel’s (ST SP, NEUTRAL, Target Price: SGD3.90) record SGD810m acquisition of US-based cyber security outfit, Trustwave in 2015.
- We expect Accel Systems Technologies Pte Ltd (ASTL) to strengthen StarHub’s fixed network services/enterprise suite of managed services (17% of group revenue) where cyber security solutions form an inherent part of the overall service/product offerings.
- StarHub would also benefit from ASTL’s portfolio of customers including key multinational companies and government agencies, allowing for cross-selling potential, in our view.
- The acquisition is also expected to complement StarHub’s investments in smart nation projects and the eventually rollout of 5G networks.
- We make no change to our core earnings forecast, TP and NEUTRAL recommendation. StarHub’s hubbing strategy faces the litmus test with the fourth entrant, TPG Telecom likely to also offer a bundled offering when its services are fully commercialised in 2018.
- Key risks are:
- stronger-than-expected competition,
- larger-than-expected capex, and
- dividend disappointments.
- Our Preferred Exposure to the Singapore telco sector remains Singtel.
Singapore Research
RHB Invest
|
http://www.rhbinvest.com.sg/
2017-05-29
RHB Invest
SGX Stock
Analyst Report
2.700
Same
2.700
