Starhub

OCBC on 7 May 2012

StarHub Ltd saw 1Q12 revenue climbed 5.8% YoY (but eased 3.5% QoQ) to S$590.9m, or just 2% shy of our forecast. Net profit jumped 27.0% YoY (down 4.6% QoQ) to S$88.3m; while the figure was nearly 13.2% ahead of our forecast, we note that the increase came mainly from the NBN roll-out - higher adoption grants and also higher amortised income. And as expected, StarHub has declared a quarterly dividend of S$0.05/share. For FY12, management has kept its previous guidance and this could disappoint the street as some expectations of a possible capital management, or a higher dividend payout, have been built in by the recent share price outperformance. As the numbers were mostly in line with our expectation, we are leaving our forecasts unchanged. We also note that the higher adoption grants and amortised income for the NBN roll-out are unlikely to be repeated in the subsequent quarters, or at least not in the same magnitude. Hence, we are also keeping our DCF-based fair value of S$3.10. Maintain HOLD.

1Q12 results slightly ahead
StarHub Ltd saw 1Q12 revenue climbed 5.8% YoY (but eased 3.5% QoQ) to S$590.9m, or just 2% shy of our forecast, driven by higher service revenue from all lines of business, and increased revenue from sales of equipment (+52% YoY on more sales of higher-priced smart phones and tablets). Net profit jumped 27.0% YoY (down 4.6% QoQ) to S$88.3m; while the figure was nearly 13.2% ahead of our forecast, we note that the increase came mainly from the NBN roll-out - higher adoption grants and also higher amortised income. Otherwise, operating EBITDA margin of 32.2% was in line with our forecast. And as expected, StarHub has declared a quarterly dividend of S$0.05/share.

Maintains previous guidance
Going forward, StarHub has maintained its previous guidance for the rest of the year, citing the uncertainties brought on by the European debt crisis etc. As such, management is keeping its revenue growth guidance in the low single-digit range and expects EBITDA margin on service revenue to remain around 30%. Management also warned of potential increase in competition in 2H12, highlighting a potential rush to upgrade handsets as iPhone 4S is due for a renewal soon. Capex should also not be more than 11% of operating revenue. More importantly, the telco has kept its S$0.20/share dividend guidance for 2012; and has also ruled out any capital management moves this year.

No change to forecasts – Maintain HOLD
As the numbers were mostly in line with our expectation, we are leaving our forecasts unchanged. We also note that the higher adoption grants and amortised income for the NBN roll-out are unlikely to be repeated in the subsequent quarters, or at least not in the same magnitude. Hence, we are also keeping our DCF-based fair value of S$3.10. Maintain HOLD. Note that the market may be slightly disappointed by the lack of capital management initiatives, given that some expectations have been built in by the recent share price outperformance.