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StarHub - Phillip Securities 2021-11-14: Stable With Roaming + Cybersecurity Optionality

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

StarHub - Stable With Roaming + Cybersecurity Optionality

  • StarHub (SGX:CC3)'s 3Q21 results met our expectations. 9M21 revenue and EBITDA were at 72% and 80% of our FY21e forecasts respectively.
  • Broadband and entertainment revenue trending ahead of our estimates due to increase in ARPUs. Mobile remains weak, dragged down by large churn in prepaid subscribers.
  • 3Q21 cybersecurity operating profits more than doubled from S$2.8mil to S$5.8mil.
  • No change to our forecasts. We maintain NEUTRAL on StarHub with an unchanged target price of S$1.24.



The Positives


Surge in operating profit in cybersecurity.

  • StarHub's 3Q21 revenue jumped 73% y-o-y to S$79mil. Operating profits spiked from S$2.8mil to S$5.8mil. The quarterly revenue run-rate improved from around S$40mil to S$70mil. There is revenue volatility due to project timing. But underlying demand is secular due to consistent threat intrusions, cyber-attacks and outsourcing of cybersecurity needs to established organizations such as Ensign.

Rising ARPU in broadband.

  • ARPU jumped 13% y-o-y to S$34 on the back of reduced legacy promotions and higher 2GBps data plans with OTT bundles.


The Negative


Mobile revenue is still soft.

  • The loss of roaming revenue has capped postpaid ARPU at S$29, almost 30% below pre-pandemic S$40 (excluding the impact of SIM-only plans). This quarter experienced a huge 50k churn out of prepaid customers to 458k subscribers.


Outlook

  • Border re-opening especially in Malaysia and China will be key drivers for roaming revenue to return. Dividend guidance of a minimum of 5 cents per share or at least 80% PATMI is maintained.

Maintain NEUTRAL and target price of S$1.24






Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2021-11-14
SGX Stock Analyst Report NEUTRAL MAINTAIN NEUTRAL 1.240 SAME 1.240



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