STARHUB LTD (SGX:CC3)
StarHub - Border Closure Still Hurts
- StarHub (SGX:CC3)'s 3Q20 EBITDA was within expectations, excluding government grants. 2020 year-to-date EBITDA was 76% of our FY20e forecast.
- Mobile revenue was down a hefty 29% y-o-y. This was due to a 25% fall in postpaid ARPU to S$29, a record low. Prepaid subscribers shrank 33% y-o-y.
- Border closure and loss of roaming revenue to continue to depress earnings. We do see some bright spots. ARPUs for broadband and Pay TV climbed q-o-q as promotions ended.
- Maintain NEUTRAL on StarHub and Target Price of S$1.24.
Positive
Better q-o-q ARPUs for PayTV and broadband.
- ARPUs for PayTV and broadband rose 2.5% and 7.1% respectively q-o-q. Reduced discounts and promotions helped. Revenue for both expanded q-o-q due to their better ARPUs.
Negative
Mobile its Achilles heel.
- Without roaming revenue, StarHub's mobile ARPU dived to a record low. Postpaid ARPU was down 25% y-o-y. Prepaid subscribers shrank by 108k or 33% y-o-y. There was less demand with fewer tourist arrivals.
Outlook
- We lower revenue by 5%. Our forecast for StarHub's equipment sales was too bullish. We also incorporate revenue from its new acquisition, Strateq. Our EBITDA is raised by 5% to include government grants and an expected uptick in its broadband and PayTV businesses. Enterprise division should enjoy a gradual recovery as projects resume and economic conditions recover.
- Separately, the launch of non-standalone 5G has garnered a better-than-expected response. Customers are transitioning faster to 5G phones. Faster speeds, lower latency and bundled content subscription have encouraged take-up by niche customers such as gamers and other heavy-content users.
Maintain NEUTRAL and Target Price of S$1.24
- Our valuation for StarHub is based on 6x FY20e EV/EBITDA. We exclude other income in our EV/EBITDA valuation as it is non-recurring.
- Target Price is set at historical 6x EV/EBITDA excluding other income. We raise FY20e EBITDA by 5% to account for another S$15mn in grants in 2H20 and stronger PayTV and broadband businesses.
- A significant resumption of international travel is key to its earnings recovery. There are little signs yet.
- See StarHub Share Price; StarHub Target Price; StarHub Analyst Reports; StarHub Dividend History; StarHub Announcements; StarHub Latest News.
Paul Chew
Phillip Securities Research
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https://www.stocksbnb.com/
2020-11-09
SGX Stock
Analyst Report
1.240
SAME
1.240
