STARHUB LTD
SGX:CC3
StarHub - CEO Briefing Highlights
Changes from within…
- New StarHub CEO Peter Kaliaropoulos hosted an analyst briefing to outline a broad strategy that will be proposed to the Board. The trend of digitalization of enterprises is an external revenue opportunity and a means to improve marketing and cost control internally.
- We await more concrete details and targets for the strategy but view the overall purpose positively and maintain our view that StarHub’s share price is currently assuming a dire scenario and that value has already emerged (see report: StarHub - Value Has Emerged | SGinvestors.io ).
- Maintain BUY with a DCF-based (WACC 5.7%, LTG -1%) Target Price of SGD1.96.
…to prepare for external threats
- The CEO highlighted that MVNO models on average do not last beyond a few years as telco incumbents make the adjustments to their business structures and marketing plans. Meanwhile incoming MNO entrant TPG Telecom will put up a fight but there are few markets where four operators each with significant market shares exist.
- Also, unlike the past when the MNO incumbents did not react quickly to disruptive promotions, there is not likely to be a long grace period for TPG. Whether via MVNOs or directly, the incumbents will react to bring parity.
~ SGinvestors.io ~ Where SG investors share
- There is a possibility of industry consolidation two to three years out.
Aligning costs with new business environments
- Costs overall will continue to be managed but with increased utilization of available technology and applications.
- The content costs for the pay TV business model will be managed ideally to a variable cost system than the current fixed cost model as contract renewal periods come due.
Worse case implied in share price already
- At current levels, StarHub’s share price is implying extreme scenarios of pay-TV revenues going to zero or wireless service revenues dropping a further c15% from our estimate.
- Key risk to our BUY is a scenario where the incumbents engage in a price war rather than let their MVNOs fight in the low-price segment against TPG.
Swing Factors
Upside
- Potential source of new revenues from enterprise segment targeting, including government contracts revolving around the Smart Nation initiatives.
- A strong contribution from leasing fees from the MyRepublic MVNO deal.
- A muted entry by TPG is a potential upside to valuation and market sentiment.
Downside
- Re-contracting/retention costs rising on the back of new smartphone launches and defensive preparation against TPG’s entry.
- Further wireless tariff package pressure onrates and/or data allocations possible due to new competition or from incumbents.
- Material investments in enterprise or content space that may have a lengthy gestation period before realizing returns.
Luis Hilado
Maybank Kim Eng Research
|
https://www.maybank-ke.com.sg/
2018-08-23
SGX Stock
Analyst Report
1.960
Same
1.960
