StarHub - RHB Invest 2020-11-20: StarHub Investors Day (SID) 2020 Highlights; Maintain NEUTRAL


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:
    1. Change (customer experience, digital transformation); and
    2. 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?

Singapore Research RHB Securities Research | 2020-11-20
SGX Stock Analyst Report NEUTRAL MAINTAIN NEUTRAL 1.300 SAME 1.300