StarHub - UOB Kay Hian 2021-09-23: Acquisition Of A Majority Stake In MyRepublic Broadband Singapore

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

StarHub - Acquisition Of A Majority Stake In MyRepublic Broadband Singapore

  • StarHub is acquiring a 50.1% stake in MyRepublic’s Singapore broadband business for S$70.8m. There is also a S$105m bridging loan to be superseded by a S$74.2m working capital loan. The transaction is priced at 8x EV/EBITDA, which we deem as fair given its controlling stake. There is a 3% earnings enhancement upon completion of the deal.
  • Overall, the deal is fair as StarHub aims to drive its broadband market share to 40% with the acquisition.
  • We re-iterate our HOLD call for StarHub and DCF-based target price of S$1.30.



StarHub is acquiring MyRepublic broadband business with 6% market share at 8x EV/EBITDA.

  • StarHub (SGX:CC3) is acquiring a 50.1% controlling stake in MyRepublic’s Singapore broadband business for an initial consideration of S$70.8m (this excludes a future consideration of < S$92m should there be EBITDA improvement from FY21-23). In addition to equity, StarHub has agreed to extend a S$105m bridging loan (at market rate) to MyRepublic. This will expire in six months and it will be superseded by a S$74.2m loan for working capital purposes. The transaction is expected to be completed by Dec 21.
  • In essence, this acquisition will augment StarHub’s broadband market share to 40% (from 34%). StarHub will keep both brands. More importantly, StarHub believes there is an opportunity to tap into MyRepublic’s enterprise business via this acquisition.
  • We believe the acquisition price is fair after a controlling stake. MyRepublic has demonstrated:
    1. the ability to grow its subscribers at an impressive 9% CAGR over five years,
    2. that ARPU is superior at S$49/month vs S$32/month for StarHub, and
    3. a net profit margin of 16% (vs StarHub’s 8%).

Earnings accretive acquisition.

  • The deal is expected to see both revenue and net profit enhancement of 3%. The transaction will be entirely funded via internal cash (StarHub’s operating cash flow stood at S$245m as of end-Jun 21. The impact to StarHub’s net-debt-to EBITDA would be marginal at 0.1x (1H21: 1.25x)


Future revenue and cost synergies.

  • StarHub believes there will be further revenue and cost synergies, specfically within the enterprise customer segment. StarHub’s acquisition could allow MyRepublic customers to access additional StarHub services including Pay-TV content, gaming etc.


Maintain HOLD on StarHub






Chong Lee Len UOB Kay Hian Research | Chloe Tan Jie Ying UOB Kay Hian | https://research.uobkayhian.com/ 2021-09-23
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.300 SAME 1.300



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