StarHub - Maybank Kim Eng 2018-10-04: Delivering On Restructuring | SG Investors.io

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StarHub - Maybank Kim Eng 2018-10-04: Delivering On Restructuring

STARHUB LTD (SGX:CC3) | SGinvestors.io

STARHUB LTD SGX:CC3

StarHub - Delivering On Restructuring

Unveils restructuring savings; maintain BUY

StarHub has unveiled manpower- and other cost-restructuring moves to prepare for future competition and industry trends.
We raise our 2019- 20E core EPS and DCF-based (WACC 5.7%, LTG -1%) Target Price by 11-15% and 13%, respectively. Maintain BUY based on these catalysts.
Worse-than-expected wireless competition is a key risk to our outlook.

Phase 1: Staff cuts

Management will be cutting headcount by 300 or 12% of its 2,500 work force as part of its digitalization and reorganization efforts discussed by its CEO in Aug 2018. The staff affected are in non-customer-facing roles with notifications to be completed by end-October.

The SGD25m restructuring cost has no impact on 2018E guidance as provisions were made in prior periods.
Factoring in both SGD30m of annual staff reduction costs for 2019E onwards, we raise core EPS by 11-15%.

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Next phases: SGD210m gross savings in 2019-21

Management also intends to rationalise procurement, leasing, repair & maintenance and distribution costs. Its target is to save SGD210m over 2019E-21E.
Part of the savings will be re-channelled to ....

Heady upside from staff-cost savings alone

With staff-cost savings alone and no other changes in revenues or opex, our 2019-20E forecasts are already significantly raised.
Admittedly, new competition from 4Q18 onwards and possible ownership changes at ....

Swing Factors

Upside

Potential source of new revenues from enterprise segment targeting, including government contracts revolving around the Smart Nation...
A strong contribution from leasing fees from...
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 on rates and/or data allocations possible ....
Material investments in enterprise or content space that may have a lengthy gestation period ....

Luis Hilado Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2018-10-04

SGX Stock Analyst Report BUY Maintain BUY 2.21 Up 1.960