StarHub - Maybank Kim Eng 2021-05-05: Stars Still Not Aligned Yet

STARHUB LTD (SGX:CC3) | SGinvestors.io STARHUB LTD (SGX:CC3)

StarHub - Stars Still Not Aligned Yet


StarHub's net profit missed; Maintain HOLD on backend loading

  • StarHub (SGX:CC3)'s 1Q21 PATMI came in at 21% of MKE/ consensus forecast.
  • Overall, StarHub's 1Q21 net profit was sluggish with the absence of roaming revenues and the lumpy nature of its cybersecurity business, which we think will be backend loaded. As such, we maintain a HOLD rating with a DCF-based (WACC: 6.2%, LTG: 0%) target price of S$1.25.
  • We remain positive on the Telco sector on potential 5G ARPU uplift and a recovery of roaming revenues in the mid-term post-COVID. We continue to like SingTel (SGX:Z74) (Target price: S$2.88) and NetLink Trust (SGX:CJLU) (Target price: S$1.11).



Weaker results driven by COVID-19

  • StarHub's 1Q21 revenue, EBITDA and net profit were 28%/24%/21% of MKE estimates. Weaker revenue of S$487.1m (-3.8% y-o-y) was mainly COVID-19 driven, which has resulted in a sharp drop in roaming revenues from the mobile segment (-20.8% y-o-y).
  • StarHub's postpaid ARPU dropped 17.6% y-o-y due to lower roaming and excess data usage revenues as the COVID-19 travel restrictions only started in late Mar 2020. Postpaid subscriber base also saw a 3% y-o-y decline to 1.42m on competitive landscape.
  • Concurrently, prepaid ARPU was down 9% y-o-y and subscriber base continued to be on a downward trend (-24% y-o-y, +5% q-o-q) due to fewer tourists and foreign workers.


Enterprise business could post upside surprise

  • StarHub’s enterprise business (+0.9% y-o-y to S$154.2m) remained stable, but we think that the division could potentially surprise on the upside due to the lumpy nature of the business. The management has observed early signs of recovery as deferred network solutions projects in 2020 are re-committed in 2021 and beyond.
  • Meanwhile, its cybersecurity division decline was mainly due to timing of recognition.

5G rollout will march on as planned






Kareen Chan Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-05-05
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.250 SAME 1.250



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