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
- Valuations based on regional peers’ 6x FY21e EV/EBITDA. StarHub pays a stable 4% dividend yield with undervalued optionality in roaming and cybersecurity. There is upside to our target price if borders re-open faster, allowing roaming revenue to return.
- Another re-rating catalyst is sustained earnings from the cybersecurity operations or a corporate exercise for higher price discovery.
- See
Paul Chew
Phillip Securities Research
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https://www.stocksbnb.com/
2021-11-14
SGX Stock
Analyst Report
1.240
SAME
1.240
