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

  • 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%.





~ SGinvestors.io ~ Where SG investors share

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



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