STARHUB LTD (SGX:CC3)
StarHub - Final Quarter Of Roaming Drag
- StarHub (SGX:CC3)'s 1Q21 revenue and EBITDA were within expectations, at 24%/26% of our FY21 forecasts.
- Revenue down 4% y-o-y, dragged down by a 21% y-o-y drop in mobile revenue to S$130mn. Broadband a bright spot with a 13% y-o-y rise to S$47mn.
- EBITDA was down 10% y-o-y, under lower high-margin roaming revenue and cost-savings.
- Our NEUTRAL recommendation and target price of S$1.24 for StarHub are maintained, pegged to regional peers’ 6x EV/EBITDA.
The Positives
Recovery in broadband revenue.
- Broadband revenue was stronger than expected. A 15% y-o-y rise in ARPU only resulted in minor churns. A vital need for broadband in homes for work and entertainment was likely responsible for the acceptance of higher prices.
Healthy cash flows.
The Negatives
Collapse in cyber-security revenue.
- A 32% y-o-y collapse in cyber-security revenue reflected lumpy projects in prior quarters. Orderbook was healthy, said StarHub. Admittedly, there is little visibility on future revenue for this division apart from the industry’s healthy outlook and demand. We forecast 30% revenue growth for FY21e.
Pay-TV subscribers at 310k, lowest since IPO in 2004.
- Churns accelerated to 8,000 in 1Q21, the highest since StarHub’s transition from cable to fibre in late 4Q19. It is unclear how much the introduction of Disney+ in February can stem the attritions.
Outlook
- We are expecting StarHub's EBITDA to be stable in FY21e. The worst of the roaming-revenue decline is over. Any rebound will depend on border re-opening. Key markets for roaming will be Malaysia and China. The slack in pay TV is expected to be picked up by growth in broadband and enterprise.
Maintain NEUTRAL on StarHub with target price of S$1.24
- EBITDA forecasts unchanged. Our valuation remains based on the regional peer of 6x FY21e EV/EBITDA. However, our PATMI forecast of StarHub is raised by S$30mn to S$115mn. Depreciation is trending much lower than modelled. Without international travel and roaming revenue, 2021 could be a lacklustre year. Growth to be driven by enterprise segment, namely cyber security and broadband.
- StarHub is paying 4% yields with some upside optionality when international borders re-open.
- See
Paul Chew
Phillip Securities Research
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https://www.stocksbnb.com/
2021-05-06
SGX Stock
Analyst Report
1.240
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