StarHub - DBS Research 2020-02-21: Beats Consensus; No Cut To Dividends

STARHUB LTD (SGX:CC3)

StarHub - Beats Consensus; No Cut To Dividends

4Q19 earnings of S$35m (+76% y-o-y, -40% q-o-q) was above consensus estimate of S$28m.
StarHub to maintain 9Scts dividend per share; reduces FY20F capex to 6-7% of revenue versus 7.5% in FY19.
Guidance implies 3-6% upside to consensus FY20F earnings; Maintain BUY with Target Price of S$1.72.

StarHub (SGX:CC3)'s 4Q19 earnings was in line with our expectation of S$34m but above consensus expectations of S$28m. The key highlight was sequential stabilisation of Mobile and Pay TV revenue which had been declining sequentially over the last three quarters.
StarHub benefited from gross handset profits rising to S$23m from S$17.5m in 3Q19 although it was offset by Cybersecurity losses rising to S$10.5m in 4Q19 from S$3.6m in 3Q19.

StarHub has guided for 1-3% rise in service revenue versus 3.9% decline in FY19 on the back of growth in cyber security revenue. Management also guided for FY20F service EBITDA margin of 27-29% versus 31.7% in FY19.
While service EBITDA is likely to decline by S$50m-55m based on the guidance, depreciation & amortization expenses should also drop by S$35m-40m as StarHub ceases to lease Singtel’s network after full migration to fiber in FY19.
Our FY20F earnings are 3% ahead of consensus as we project 1% service revenue growth and 28% service EBITDA margins in FY20F.

StarHub also guided for FY20F capex-to-revenue of 6-7% excluding 5G and spectrum versus 7.5% capex in FY19, which is below our estimate of 12-13%. StarHub expects major 5G capex towards the end of 2020 or early 2021 when 3.5GHz spectrum becomes available.
See StarHub Share Price; StarHub Target Price; StarHub Analyst Reports; StarHub Dividend History; StarHub Announcements; StarHub Latest News.

Sachin MITTAL DBS Group Research | https://www.dbsvickers.com/ 2020-02-21

SGX Stock Analyst Report BUY MAINTAIN BUY 1.72 UP 1.430