Starhub

Kim Eng on 7 Feb 2014

Within expectations
StarHub’s FY13 results were within expectations with net profit of SGD371m, up 3% YoY. Overall, all lines of business performed within expectations, including the ultra-competitive consumer fixed broadband business. A final dividend of 5 SGD cents a share was proposed, bringing StarHub’s full-year dividend to 20 cents a share, in line with expectations.

Dividends to be maintained
Unlike M1, which declared a special dividend, StarHub intends to keep its annual dividends at 20 SGD cents a share as it expects 2014 capex to be higher at 13% of service revenue (we had forecast
12%, vs 12.8% in 2013). This is disappointing, but given that its net debt/EBITDA ratio is still at a multi-year low of 0.5-0.6x, we would not rule out dividends being raised in the future.

We still like StarHub
Although there is no increase in ordinary dividends, the yield of almost 5% is still supportive of share price. We also anticipate other catalysts. One, margin guidance of 32% is still too low, in our view. Given the more competitive handset space, there is room for handset subsidies to fall further. Two, NBN provisioning should ease with the government’s push to speed up NBN rollout. This could give the higher-margin enterprise business a further lift.