Starhub - RHB Invest 2017-05-29: Buys Into A Cyber Security Outfit

Starhub - RHB Invest 2017-05-29: Buys Into A Cyber Security Outfit 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: 
    1. stronger-than-expected competition, 
    2. larger-than-expected capex, and 
    3. dividend disappointments. 
  • Our Preferred Exposure to the Singapore telco sector remains Singtel.

Singapore Research RHB Invest | 2017-05-29
RHB Invest SGX Stock Analyst Report NEUTRAL Maintain NEUTRAL 2.700 Same 2.700