StarHub - Phillip Securities 2019-05-06: Awaiting Further Clarity On Ensign


StarHub - Awaiting Further Clarity On Ensign

  • STARHUB LTD (SGX:CC3)'s 1Q19 results were within our expectations.
  • The enterprise business continues to alleviate weakness in mobile and pay-tv.
  • Cybersecurity business is gaining traction, revenue surged 41% y-o-y.
  • We revised our FY19e EBITDA and NPAT upwards by 1% and 3% respectively due to the results.
  • Remain NEUTRAL with a higher target price of S$1.62 (previously S$1.58).


Growth in enterprise remains in play.

  • The enterprise business grew 14% y-o-y. Network solutions which comprises of data & internet, managed services and voice services grew S$8.9mn (9% y-o-y). StarHub continues to ride on the digitalisation wave. There is increased in demand for managed services across key verticals such as government, financial services, hospitality, transport, SMEs and healthcare.
  • We believe Ensign, StarHub’s cybersecurity arm is gaining traction as it expanded S$7.7mn (41% y-o-y) in revenues. It currently accounts for 20% of enterprise revenue or 4% of total revenue. Ensign is currently negative EBITDA S$5mn.

Rebranding materialising.

  • We believe the rebranding exercise (“Hello Change”) is aiding subscriber growths since it took effect in 4Q18. The exercise simplifies mobile plans by removing hidden charges, no-lock in contracts together with higher data allowances. This boosted net post-paid adds to approximately 73,000 y-o-y this is more than 5 years high for StarHub.
  • We believe StarHub’s MVNO partners MyRepublic and VivoBee contributed to these net-adds as well. Pre-paid subscriber grew by 1,000. Stabilising after four consecutive quarters of decline.


ARPU to trend lower before stabilising.

  • ARPU declined 5% q-o-q to S$39. We expect this trend to continue. SIM-only plans and MVNO contribution have increased is weighting in the post-paid segment. We believe ARPU will come under pressure because of lower excess data charges as consumer pays a fixed fee for higher data allowances. As such, we have modelled in a decline in ARPU in FY19. We expect it to stabilise in 4Q19, as we do need foresee SIM-only plans to grow exponentially.
  • Smartphones are getting costlier causing smartphone replacement cycle to lengthen. We believe SIM-only plans acts as a transitionary mobile plan before consumers take on a new subsidised handset plan.


  • Management reiterated future savings from pay-tv content cost with one major renegotiation coming up. Although Ensign is still in its infancy we are awaiting further clarity on its growth. Ensign may be a re-rating catalyst for StarHub when it achieves scale.

Maintained NEUTRAL with a higher Target Price of S$1.62 (previously S$1.58)

  • We revised our FY19e EBITDA and NPAT upwards by 1% and 3% respectively due to the results.
  • Remain NEUTRAL with a higher target price of S$1.62 (previously S$1.58).

Alvin Chia Phillip Securities Research | https://www.stocksbnb.com/ 2019-05-06
SGX Stock Analyst Report NEUTRAL MAINTAIN NEUTRAL 1.62 UP 1.580