StarHub

UOBKayhian on 21 Aug 2014

FY14F PE (x): 22.5
FY15F PE (x): 20.3

Mobile revenue stagnant in 1H14. StarHub’s mobile revenue was unchanged at S$616.2m in 1H14. Comparatively, SingTel and M1 have shown more positive momentum with total mobile revenue growing 2.9% yoy and 4.1% yoy respectively.

Post-paid ARPU diluted by secondary lines. StarHub’s post-paid ARPU has declined for two consecutive quarters by 1.4% qoq in 4Q13 and 4.4% qoq in 1Q14. The dilution was caused by its SharePlus plan, which allows post-paid subscribers to share voice minutes and bundled data with family members. The aggressive promotion to offer SharePlus lines for free has ended in May. StarHub has since started to charge an affordable price of S$8 per SharePlus line in June and post-paid ARPU has rebounded accordingly by 3% qoq to S$68/month in 2Q14. We estimate revenue from post-paid mobile expanded 2.3% yoy in 1H14.

Maintain HOLD. Our target price of S$4.33 is based on DCF (required rate of return:
6.7%, terminal growth: 1%). Our suggested entry price is S$3.95.