StarHub – CIMB

Time to shine

Best exposure to immigration influx and rising wages. Singapore’s population boom (+4.4%yoy) on immigration influx and wage growth (+8%yoy) helped drive Singapore’s mobile and broadband penetration rates to 113% (+210bps mom) and 75% (270bps mom) respectively in July. We reiterate our view that StarHub offers the best exposure to Singapore’s telco services consumption growth story.

Rejuvenated cable TV could surprise. StarHub has introduced compelling new content, setting the stage for cable TV to surprise over the next few quarters.

Re-rating around the corner. StarHub was de-rated by the market in 1H07 on unjustifiable concerns surrounding mioTV and pricing pressure on broadband. Operating results in 2H07 should dispel these concerns, triggering a re-rating.

Consensus dividend yield estimate too conservative. We reiterate our view that consensus is due to upgrade its 5.6% CY08 yield expectations towards our expectation of 10% yield.

Maintaining Outperform, upgrading target price to S$3.64 as we roll forward our DCF valuation (WACC: 6.9%, terminal growth: 1%) to CY08 basis. StarHub is our preferred Singapore telco pick over the next 12 months. Key catalysts include earnings delivery and dividend payouts that beat consensus expectations.

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