Starhub – Kim Eng

SELL

• The stock has fallen below the long term trendline established since mid 2004.

• Support at $2.58 is likely to be tested in near term.

• 2Q08 net profit of $64m (-20.5% yoy ) is well below consensus of $83m. The disappointing results is due to margin squeeze as equipment subsidies, higher marketing costs and loss of Euro 2008 rights arising from intense competition ate into EBITDA margins.

• Although competition in 2H08 is expected to ease, management guided lower FY08 revenue growth of 7% and margin of 31% while maintaining DPS at 18¢.

• At $3.80, the stock currently offers a dividend yield of 6.4% vs MobileOne’s 7.5%

• Recommend sell.