StarHub – OCBC
Single-digit revenue growth in 2011
Margins slightly softer than expected. StarHub Ltd’s 4Q10 revenue rose 1.6% YoY and 1.2% QoQ to S$559.0m, about 3.1% above our estimate, while net profit came in around S$80.4m, up 8.2% YoY; but it fell 1.9% QoQ and was also 8.8% below our forecast, due to higher staff cost and dearer content cost. As a result, 4Q10 service EBITDA margin came in at 31.5%, down slightly from the 32.3% seen in 3Q10, but still stronger than the 29.2% recorded in 4Q09. And as guided, StarHub maintained its S$0.05/share cash dividend for the quarter. For the full year, revenue grew 4.1% to S$2237.7m, just 0.8% ahead of our estimate, while net profit fell 17.7% to S$263.2m, or around 2.9% shy of our forecast.
Maintaining mobile market share. Mobile revenue grew 7.9% YoY and 1.5% QoQ to S$302.7m, as StarHub added 12k new postpaid (+1.2% QoQ) and 12k prepaid customers (+1.1%) in the quarter; this helping to keep its market share stable at 29.4% (versus 29.5% in 3Q10 and 28.0% in 4Q09). And due to the higher take-up of smartphone plans, postpaid ARPU for the quarter rose further to S$74/month from S$72 in both 3Q10 and 4Q09, despite a continued drop in MOU (minutes of use). While this increased its acquisition cost per user from S$109 in 4Q09 to S$120 in the quarter, it was lower than the previous quarter’s S$130.
Pay TV business stabilizing. While Pay TV revenue fell 10.5% YoY, it was down by a much smaller 0.6% QoQ to S$91.8m, suggesting that the impact from the loss of several key sports content is not as bad as feared. Subscriber base was also stable at 538k versus 537k in 3Q10 and 539k in 4Q09, although monthly ARPU fell 14.3% YoY and 4.0% QoQ due to lower sports package pricing. Broadband revenue, though down 0.2% YoY to S$59.0m, but up 1.2% QoQ, also suggesting that it is starting to see some stability. However, with the slower-than-expected roll-out of NBN, any near-term pickup in ARPU looks unlikely.
Guides for 30% service EBITDA margin. For 2011, StarHub expects to see single-digit revenue growth, with service EBITDA margin coming in around 30% (versus 28% in FY10); capex should also not exceed 13% of operating revenue and maintains S$0.05/share quarterly dividend. In view of the latest guidance, we raise our FY11 revenue forecast by 1.1% but cut our earnings forecast by 9.9%. However, our DCF-based fair value remains unchanged at S$3.02. Maintain BUY.