StarHub Ltd reported 3Q13 revenue easing 1.2% YoY (down 1.4% QoQ) to S$578.8m, versus our S$592m forecast; net profit slipped 0.9% YoY (down 5.2% QoQ) to S$95.3m, as compared to our S$100m estimate. Quarterly dividend of S$0.05/share was declared as expected. As 9M13 revenue of S$1745.7m (down 1.2%) met just 69% of our full-year forecast, we need to pare our FY13 estimate by 6% (FY14 by 5%). Note that StarHub now expects to see a lower operating revenue (but flat service revenue) in 2013, as opposed to an earlier guidance for low single-digit revenue growth. Our DCF-based fair value remains at S$3.82. Maintain SELL.
3Q13 slightly below forecast
StarHub Ltd reported 3Q13 revenue easing 1.2% YoY (down 1.4% QoQ) to S$578.8m, versus our S$592m forecast. Besides lower handset sales (most subscribers were probably waiting for the much-anticipated launch of the new Apple iPhone 5s and Samsung Note 3 in Oct), we also saw some softening in broadband revenue (down 4.9% YoY and 3.4% QoQ) and also Pay TV sales (down 3.7% YoY, -0.1% QoQ). While service EBITDA margin improved to 33.3% in the quarter (versus 31.2% in 2Q13 and 32.2% in 3Q12), net profit slipped 0.9% YoY (down 5.2% QoQ) to S$95.3m, as compared to our S$100m estimate.
Lowering guidance for operating revenue
For 2013, StarHub now expects to see a lower operating revenue (but flat service revenue), as opposed to an earlier guidance for low single-digit revenue growth; this again citing a challenging overall market, especially in the broadband space, where it continues to see intense competition coming from the smaller players. On the other hand, it raised its service EBITDA margin outlook from 31% to 32%, although still lower than the 33.7% achieved in 9M13 (allowing for year-end promotion opportunities). It left capex unchanged at 13% of revenue and kept its annual cash dividend of S$0.20/share or S$0.05/quarter.
Better margin assumptions for FY13 and FY14
As 9M13 revenue of S$1745.7m (down 1.2%) met just 69% of our full-year forecast, we need to pare our FY13 estimate by 6% (FY14 by 5%); this to reflect lower equipment sales trend and also higher competition in the broadband market. However, StarHub’s strategy of focusing on margins rather than revenue growth should continue to gain traction, thus we are raising our FY13 earnings forecast by 8% (FY14 by 11%).
StarHub Ltd reported 3Q13 revenue easing 1.2% YoY (down 1.4% QoQ) to S$578.8m, versus our S$592m forecast. Besides lower handset sales (most subscribers were probably waiting for the much-anticipated launch of the new Apple iPhone 5s and Samsung Note 3 in Oct), we also saw some softening in broadband revenue (down 4.9% YoY and 3.4% QoQ) and also Pay TV sales (down 3.7% YoY, -0.1% QoQ). While service EBITDA margin improved to 33.3% in the quarter (versus 31.2% in 2Q13 and 32.2% in 3Q12), net profit slipped 0.9% YoY (down 5.2% QoQ) to S$95.3m, as compared to our S$100m estimate.
Lowering guidance for operating revenue
For 2013, StarHub now expects to see a lower operating revenue (but flat service revenue), as opposed to an earlier guidance for low single-digit revenue growth; this again citing a challenging overall market, especially in the broadband space, where it continues to see intense competition coming from the smaller players. On the other hand, it raised its service EBITDA margin outlook from 31% to 32%, although still lower than the 33.7% achieved in 9M13 (allowing for year-end promotion opportunities). It left capex unchanged at 13% of revenue and kept its annual cash dividend of S$0.20/share or S$0.05/quarter.
Better margin assumptions for FY13 and FY14
As 9M13 revenue of S$1745.7m (down 1.2%) met just 69% of our full-year forecast, we need to pare our FY13 estimate by 6% (FY14 by 5%); this to reflect lower equipment sales trend and also higher competition in the broadband market. However, StarHub’s strategy of focusing on margins rather than revenue growth should continue to gain traction, thus we are raising our FY13 earnings forecast by 8% (FY14 by 11%).
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