StarHub - OCBC Investment 2021-02-24: Moving Past The Darkest Days


StarHub - Moving Past The Darkest Days

  • Lower y-o-y contributions, but sequential improvement noted.
  • StarHub's dividend to be at least S$0.05 per share for FY21.
  • Fair value estimate for StarHub raised from S$1.13 to S$1.32.

Unsurprisingly weaker y-o-y…

  • StarHub (SGX:CC3)’s 4Q20 revenue fell 5% y-o-y to S$579.5m, due largely to lower contributions from Mobile, Pay TV and Sales of Equipment, though partially offset by higher revenues from Broadband and Enterprise Business.
    • Mobile service revenue fell by 27% y-o-y, due to lower postpaid and prepaid revenues on the back of travel restrictions.
    • Pay TV service revenue fell 17% y-o-y due mainly to a lower subscriber base, the cable-to-fibre migration last year as well as the impact from COVID-19 on commercial TV revenue and subdued levels of advertising spend from Enterprise customers.
  • StarHub’s 4Q20 EBITDA fell 7% y-o-y to S$129.3m, which came in 12% above consensus, which includes the Job Support Scheme (JSS) payouts of S$ 11.3m. 4Q20 PATMI was S$ 36.1m, or 37% above consensus.
  • StarHub's dividend for FY20 came in at S$0.05 per share, which was below our expectations of S$0.06.

…but good sequential improvement

  • We are encouraged that we are seeing signs of sequential improvement. While service revenue was down 6% y-o-y, it was up 8% q-o-q with cybersecurity increasing 59% q-o-q. We note that on a q-o-q basis, mobile postpaid, mobile prepaid, pay TV and broadband ARPUs came in broadly stable.
  • We understand that there appears to be more activity in the enterprise space as businesses prepare for a post-Covid world. We also note that management intends to explore M&A opportunities moving forward to strengthen its enterprise capabilities.

Guidance light but embedding conservatism

  • In terms of FY21 guidance, StarHub's management shared that they expect service revenue to remain stable, with capex commitment (excluding 5G capex and spectrum right) to be 9-11% of total revenue.
  • In terms of dividend, StarHub is looking at the higher of S$0.05 per share, or its dividend policy (which is at least 80% of adjusted net profit attributable to shareholders). We note that management is taking a declining outlook on mobile, assuming COVID-19 impact on travel remains in 2021.
  • See StarHub Share Price; StarHub Target Price; StarHub Analyst Reports; StarHub Dividend History; StarHub Announcements; StarHub Latest News.
  • As we roll forward our estimates and following adjustments, our fair value estimate for StarHub rises from S$1.13 to S$1.32.
  • Separately, StarHub has noted accelerating demand for its 5G plans driven by the launches of premium 5G handsets, and we believe that ARPU-improvement is not implausible, with company noting that 5G plans are contributing to stabilising mobile ARPUs sequentially in 4Q20.

OCBC Research Team OCBC Investment Research | 2021-02-24
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.32 UP 1.130