STARHUB LTD (SGX:CC3)
StarHub - SID 2020 Highlights; Maintain NEUTRAL
- StarHub (SGX:CC3)’s maiden Investor Day 2020 (SID 2020) offered insights on its digital transformation plans, enterprise capabilities, and 5G.
- We continue to see near-term challenges in the mobile segment, from competition and border closures. This would be partly mitigated by cost efficiencies from its digitalisation agenda.
- Key risks: Competition, weaker-than-expected earnings, and execution.
- Maintain NEUTRAL, S$1.30 target price, 0% upside with 4% FY21F yield.
Virtual sessions with C-suites.
- StarHub's Investor Day 2020 presentations were on two broad themes:
- Change (customer experience, digital transformation); and
- diversification (capabilities & regional expansion), with high-level updates on business segments (consumer, enterprise and cyber-security).
- Broadly, the key takeaways from the sessions do not alter our view of 5G monetisation challenges for the group, with near-term weakness in the mobile segment stemming from competition and travel restrictions.
Digital transformation and cost savings.
- The ongoing IT transformation would build on its earlier 3-year cost-out programme (2018-2021), for which > 75% savings have been realised to date. Aside from workforce optimisation (39% of savings), other cost wins include the restructuring of pay-TV operations/content (36%) and opex efficiencies (25%).
- The shift to a hybrid TV model via partnerships with over-the-top (OTT) companies has led to a significantly lower cost to serve (elimination of TV head-end and installation costs). Management sees scope for additional opex savings in subscriber acquisition (SAC), leased lines (reduced retail footprint), repairs and maintenance and product simplification, going forward.
Customer experience (CX) redefined.
- StarHub has executed well to raise its net promoter score (NPS), a gold-standard metric to gauge customer loyalty synonymous with commercial/brand value. It exceeded its NPS target in 2019, with another new high set in 3Q20.
- StarHub’s digital plan, giga!, was cited as a major NPS win that allowed the group to augment its postpaid subscriber base despite the stiff competition.
Focusing on key enterprise verticals.
- StarHub seeks to increase depth (deep vertical solutions) and breadth (strategic partnerships) to drive enterprise growth. On cyber-security, it has a 16% market share (via Ensign) of an > S$800m addressable market, which is made up of three players.
Special dividend?
- Temasek’s call option for the 20% assigned shares of Ensign (acquired in 2018) is exercisable in 3Q21. This could see some proceeds being returned to shareholders. StarHub has maintained its 80% dividend payout guidance, excluding one-off transactions (job support scheme (JSS) credits, asset disposals/gains etc).
- See StarHub Share Price; StarHub Target Price; StarHub Analyst Reports; StarHub Dividend History; StarHub Announcements; StarHub Latest News.
Singapore Research
RHB Securities Research
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https://www.rhbinvest.com.sg/
2020-11-20
SGX Stock
Analyst Report
1.300
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