StarHub - Maybank Kim Eng 2018-08-23: CEO Briefing Highlights

StarHub - Maybank Kim Eng Research 2018-08-23: Ceo Briefing Highlights 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 | ). 
  • 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. 

~ ~ 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


  • 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.


  • 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 | 2018-08-23
SGX Stock Analyst Report BUY Maintain BUY 1.960 Same 1.960