StarHub - Phillip Securities 2020-11-09: Border Closure Still Hurts

STARHUB LTD (SGX:CC3) | SGinvestors.io 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






Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2020-11-09
SGX Stock Analyst Report NEUTRAL MAINTAIN NEUTRAL 1.240 SAME 1.240



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