STARHUB LTD (SGX:CC3)
StarHub - 1Q22 DARE+, Opex Front-loaded
- StarHub (SGX:CC3)'s 1Q22 results were in line. We see FY22F core earnings (-9% y-o-y) being crimped by the front-loading of investments in relation to the DARE+ programme with some bright spots in mobile, broadband, and enterprise.
- StarHub’s risk-reward profile is balanced, in our view. Maintain NEUTRAL and DCF-derived S$1.29 target price, 2% upside, 4% yield. Our target price has baked in a 4% ESG premium based on our in-house methodology.
- We prefer SingTel (SGX:Z74) for Singapore telecommunications exposure.
Weaker seasonality and front-loading of opex.
- StarHub's 1Q22 core earnings fell 27.7% y-o-y (-18% q-o-q) on lower EBITDA from the front-loading of IT transformation and investment costs against flat service revenue. The latter was up 10.8% y-o-y with growth across all segments. There were maiden contributions from StarHub’s HKBN JOS assets in Singapore and Malaysia, for which the acquisitions were completed at end 2021.
Mobile looking up.
- Mobile revenue grew 3.9% y-o-y and looks to be off its lows. This is consistent with the recovery in roaming revenue and prepaid starter pack sales with borders opening to international travellers.
- Postpaid subs base y-o-y growth of 74,000 was led by the sale of digital brand giga!, with incrementally higher ARPU of S$29.00 on increased subscription and roaming revenues.
- Prepaid APRU slipped to a low of S$8.00 with heightened promotions to drive subs growth and retention – the prepaid subs base up 49,000, ie the highest since 4Q20.
- StarHub has netted > 0.4m 5G subs at end 1Q22, up from >300k at end 2021.
Broadband and entertainment.
- The broadband subs decline is behind StarHub, with revenue up 9.6% y-o-y (+5.5% q-o-q). This was supported by the higher take-up of 2Gbps plans on more promotional activities. For the entertainment segment, revenue was steady q-o-q (+3.9%). There were 11 over-the-top (OTT) partners on-boarded to date.
- We see StarHub’s recent reclaim of the exclusive English Premier League content after 12 years as complementing its new entertainment proposition (classical pay-TV and OTT), adding to the list of OTT partners on-boarded.
Enterprise revenue was flat sequentially but up 18.9% y-o-y, led by cyber-security and regional ICT.
- Higher project recognition in the preceding quarter explained the 30% q-o-q drop in cyber-security revenue. The maiden contribution from HKBN JOS (effective January) saw ~S$28m in revenue recognition, making up 15% of overall enterprise segment sales.
Key risks
- Key downside risks are competition, weaker-than-expected earnings, and larger-than-expected investments in the DARE+ programme.
- Upside risks: Larger-than-expected earnings and cost savings from DARE+.
- See
Singapore Research
RHB Securities Research
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https://www.rhbinvest.com.sg/
2022-05-04
SGX Stock
Analyst Report
1.29
DOWN
1.300
