StarHub – Phillip

Q3 FY07 Results

3Q results. StarHub reported 3Q operating revenue of S$513.1m (+11.4% yoy) and net profit of S$81.3m (-0.2% yoy). Moreover, EBITDA increased to S$164.1m (+4.8% yoy). It also declared an interim dividend of S$0.04 per ordinary share, which was significantly higher than the interim dividend of S$0.03 last year.

On a half-year basis, operating revenue of S$1,474.9m was 10.8% better yoy while 1H06 net profit of S$232.0m was 6.2% higher.

Performances of the various business units. StarHub reported strong growth in its business units: mobile revenue was S$266.2m (+13.9% yoy), cable TV revenue was S$85.8m (+8.5% yoy), broadband revenue was S$62.0m (+11.7% yoy), fixed network service revenue was S$73.4m (+3.9% yoy) and sale of equipment was S$25.7m (+18.7% yoy). As at 30 September 2007, the number of customers for its mobile, cable TV, broadband businesses were 1,683,000, 499,000 and 338,000 respectively.

However, total operating expenses increased to S$405.4m (+13.4% yoy). This was due mainly to the amortisation of the costs for the new season of Barclay Premier League programming rights.

FY 2007 Outlook. StarHub expects continued growth in its operating revenue and will pay a minimum annual cash dividend of 15.5 cents per ordinary share for 2007. This amounts to a dividend yield of 5.0 percent for 2007 based on its previous close price of S$3.12.

HOLD recommendation, target price at S$3.16. StarHub remains attractive as a dividend play although its operations are focused on the Singapore market. In view of the recent rise in share price, we have a HOLD recommendation on the stock due to limited upside. We are maintaining the fair value at S$3.16.

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