StarHub - Maybank Kim Eng 2021-02-22: Mixed Bag ~ Results Beat; Maintain HOLD On Lower Margin


StarHub - Mixed Bag

Results beat; Maintain HOLD on lower margin

Enterprise shapes up; Mobile and PayTV stable

  • StarHub's FY20 revenue of S$2.0b (-13% y-o-y) was impacted by lower revenue from mobile (-24.3 y-o-y), PayTV (-24.2% y-o-y) and equipment sales (-22.3% y-o-y). This was partially offset by 12.2% y-o-y growth from its enterprise business, driven by a 51.4% y-o-y jump in Cybersecurity revenue and maiden contribution from regional ICT Services (S$33.2m).
  • That said, EBIT margin expanded to 11.2% (+0.3ppt) on its cost-saving initiatives and Job Support Scheme (JSS) grants of S$34m. Meanwhile, its mobile division saw an uptick of 3.2% q-o-q in 4Q20 on a pick-up in post-paid ARPU of S$30 (3Q20: S$29), while PayTV’s subscriber base and ARPU were also stable.
  • StarHub has declared a final dividend of S$0.025 per share, bringing total dividend to S$0.05 per share, or 3.9% FY20 yield.

Stabilising outlook

  • StarHub has seen encouraging uptake of their higher-priced 5G plan, driven by the launch of popular 5G premium handsets. The group has also seen gradual resumption of business activities and its Managed Services segment has seen a recovery in orderbook as Enterprise customers commit to strategic initiatives in FY21 and beyond.
  • Meanwhile, StarHub has recently secured an exclusive distributorship of Disney+ content in Jan 2021.
  • On dividends, StarHub has guided for FY21E dividend of at least S$0.05 per share or 80% of its core profit. See StarHub's Dividend History.

But lower service EBITDA margin

  • StarHub has guided for lower service EBITDA margin of 24-26% (vs FY20: 31%) due to a change in sales mix, lower Job Support Scheme payouts and initial investments to be made relating to IT transformation, 5G infrastructure and data centre rollouts.
  • We have cut our revenue forecast by 2-3% as we believe roaming revenue will take more time to recover. As a result of lower service EBITDA margin guidance, our FY21-22E EPS forecast is reduced by 0-5% and we lowered our DCF-based target price to S$1.25.
  • See StarHub Share Price; StarHub Target Price; StarHub Analyst Reports; StarHub Dividend History; StarHub Announcements; StarHub Latest News.
  • We forecast StarHub's FY21E dividend per share at S$0.06, translating to a yield of 4.7%.

Kareen Chan Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-02-22
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.25 DOWN 1.320