Month: February 2009
StarHub – OCBC
Guides for Stable FY09 Outlook
4Q08 results within expectations. StarHub reported its 4Q08 results last night, with revenue down 0.4% YoY at S$536.7m, while net profit fell 10.9% to S$87.5m. But we note that the decline was mainly due to a larger tax credit in 4Q07; pre-tax profit was actually up 8.1% YoY at S$99.0m. And on a sequential basis, revenue was up 2.3%, and while it was about 2.3% lower than our forecast, its net profit jumped climbed 10.2%, which was also about 12.5% above our estimate. Again, the main reason for the “outperformance” was due to a lower-than-expected tax rate (11.6% in 4Q08 versus 21.2% in 3Q08). Otherwise, the results were mostly within expectations.
For the full year, revenue rose 5.7% to S$2127.6m, or about 0.7% shy of our forecast, and also below its growth guidance of 7%, while net profit eased 5.7% to S$311.3m, but still 3.2% ahead of our estimate. StarHub also declared a final dividend of S$0.045/share as promised.
Recovery in mobile revenue. On the mobile front, although revenue was down 1.2% YoY at S$272.2m, it was up 3.0% QoQ, which also reverses the previous quarter’s 1.8% QoQ slide. The rebound was due to the 1.2% QoQ growth in pre-paid customers (following two straight quarters of decline), as well as a pick up in pre-paid ARPU from S$22 in 3Q08 to S$25. For its post-paid segment, although net adds grew by 1.6% QoQ and revenue grew by 1.1% QoQ, ARPU slipped further from S$74 in 3Q08 (S$77 in 2Q08) to S$71; management explained that the decline was due to a higher mix of subscribers on data only plans, as well as lower usages of IDD and roaming services. Meanwhile, StarHub was able to reduce its average acquisition cost per user further from S$104 in 3Q08 to S$86.
Guides for low single-digit growth. Going forward, management expects FY09 operating revenue to grow by low single-digit; it also expects to keep service EBITDA margin at around 31%, and keep its capex within 11% of operating revenue. More importantly, based on its projected profitability and cash flow, StarHub intends to continue to pay S$0.045/cent dividend every quarter, totalling S$0.18 for the full year.
Keep BUY with S$2.78 fair value. But given the still uncertain economy climate, we are just bumping up our FY09 estimates marginally (0.9% to 1.5%), and due to the slightly higher capex, our DCF-based fair value eases slightly from S$2.81 to S$2.78. Nevertheless, we continue to believe that StarHub’s business remains resilient and coupled with an attractive 8.9% dividend yield, we maintain our BUY rating.
StarHub – BT
StarHub Q4 net profit drops 11%; full-year revenue hits record
A 17 per cent surge in pay-TV revenue and single- digit sales growth across three other business lines lifted StarHub Ltd to a record full year revenue of $2.128 billion for its fiscal year 2008.
But increased acquisition and retention costs in the first half of the year, as well as higher pay-TV content costs put a drag as full year net income fell 6 per cent to $311 million, from $330 million. Full year earnings per share, on a diluted basis, fell 2 per cent to 18.16 cents, from 18.54 cents.
StarHub yesterday announced the results of its fourth quarter and full year. For the three months ended Dec 31, 2008, sales dipped 0.4 per cent to $537 million, from $539 million in the year-ago period.
Net income fell 11 per cent to $87 million, from $98 million. Earnings per share, on a diluted basis, fell 11 per cent to 5.09 cents, from 5.73 cents.
‘In the fourth quarter, we managed through an increasingly volatile business environment, as the Singapore economy continued to contract – yet we ended the full year with a larger customer base and a relatively strong fourth quarter,’ said StarHub CEO Terry Clontz.
StarHub’s full year sales improved by 6 per cent its previous record of $2.014 billion achieved in 2007. Earnings before interest, taxes, depreciation and amortisation (Ebitda) rose 0.2 per cent to $644 million.
The company is recommending a final dividend of 4.5 cents per share, bringing the total dividends to 18 cents per share for its fiscal year 2008.
StarHub lifted sales across its four key business segments in 2008, led by pay-TV which registered the highest revenue growth at 17 per cent. Mobile, broadband and fixed network revenue grew by four, three and seven percentage points respectively.
Mobile business remained the major revenue contributor at 51 per cent. Pay-TV, broadband, fixed network services and sales of equipment contributed 19, 12, 14 and 5 per cent respectively to the mix.
StarHub also swelled its customer base in key segments. Its mobile customer base grew by less than one per cent to 1,765,000 subscribers at the end of Q4. Pay TV subscribers increased 4 per cent to 524,000; while broadband customers grew 8 per cent to 373,000.
On Monday, rival SingTel announced it grew its mobile phone subscriber base in Singapore by 26 per cent to 2.94 million at the end of 2008, from a year ago.SingTel, which last year scored a coup with its exclusive Apple iPhone deal, is reportedly set to launch the highly-anticipated first version of the Google phone here.
Mr Clontz told BT that StarHub will be focusing on the second-generation of the Google phone instead, and could launch that version before June this year. As for the iPhone, it is ‘still in dialogue with Apple’ but is ‘confident’ of launching it this year.
This year will also see StarHub bidding to become the operating company for Singapore’s next-generation fibre-optic broadband infrastructure.
StarHub last year lost out to a consortium involving SingTel in the first phase of that project. The second-phase winner is expected to be announced by March.
Current Analysis senior analyst Soh Siow Meng said that StarHub, as it plys primarily in the local market, will face challenges posed by competition, expected dip in foreigner population and belt-tightening by businesses and consumers in the coming year. ‘However, there is still room for growth,’ he said.
StarHub shares closed unchanged at $2.02 yesterday.
SingTel – BT
SingTel eyes acquisitions, higher stakes in partners
SINGTEL is on the lookout for acquisition opportunities and – as usual – is keen to raise its stakes in regional associates. ‘We are in a very strong financial position that will put us in a good position to look for acquisition opportunities,’ said group CEO Chua Sock Koong. ‘But clearly, we are not in a big rush to make acquisitions, given the global uncertainties.’
SingTel has always been keen to raise its stakes in regional associates, she added. But this is on a willing buyer-seller basis and terms that are acceptable to each side. ‘If an opportunity does arise, we will look at it seriously,’ Ms Chua said.
Also at SingTel’s third quarter results briefing yesterday, SingTel International CEO Lim Chuan Poh told reporters the group will not pick up cheap assets that have no strategic value and it remains focused on the Asia-Pacific region.
So far, not all of SingTel’s overseas ventures have borne fruit. Pakistan’s Warid and Bangladesh’s PBTL suffered bigger losses in the December quarter, due to to fair value losses. But SingTel said it remains committed to its investments in these operators and will try to improve their performance.
SingTel – BT
SingTel’s Q3 net profit slides 16% to $799m
It is feeling the impact of the global downturn; affirms FY09 guidance
by weaker regional currencies, Singapore Telecommunications posted a 16 per cent fall in net profit from a year ago to $799 million for the third quarter ended Dec 31, 2008.
It is starting to feel the pinch of the global downturn and affirmed its outlook for the fiscal year ending March 31, 2009 – that overall pre-tax earnings contributions of the regional mobile associates will be lower than the previous year.
Still, SingTel noted that Q3 was ‘one of its best quarterly performances’, with double-digit revenue growth in Singapore and Australia despite the difficult environment.
The group’s Q3 net profit – which took into consideration the group’s share of a $44 million exceptional loss on the non-cash impairment charge of a unit of Thai associate Advanced Info Service PCL – was also higher than the average $770 million forecast by four analysts polled by Reuters.
SingTel’s group operating revenue dipped 3.2 per cent to $3.7 billion, hurt by the Singapore dollar’s strength against the currencies of overseas markets in which its associates operate.
In particular, the Australian dollar suffered a steep 23 per cent decline against the Sing dollar from a year ago. Had the Aussie dollar remained stable, the group operational revenue could have grown 14 per cent, SingTel said.
Its group operational Ebitda (earnings before interest, taxes, depreciation, and amortisation) for Q3 fell 6.9 per cent to $1.06 billion while underlying net profit slipped 10.1 per cent to $838 million.
Operating revenue from its Singapore business grew 21 per cent to a record $1.51 billion in Q3, bolstered by first-time inclusion from newly acquired Singapore Computer Systems while fully owned Australian subsidiary Optus delivered a 10 per cent growth in operating revenue to A$2.2 billion (S$2.21 billion).
Pre-tax profit contributions from associates in Q3 fell 24 per cent to $486 million, hit by the depreciation in regional currencies.
‘The economic slowdown has started to impact the group,’ said group CEO Chua Sock Koong.
But she noted that SingTel is no novice in managing downturns. It is in a strong financial position to strengthen its market presence through customer-focused products and greater cost efficiencies.
It will soon be rolling out the Google phone known as HTC Dream in an exclusive tie-up, almost six months after its launch of Apple’s 3G iPhone, to target a different audience.
‘We will come up with significant differentiators when we launch the product,’ said Allen Lew, CEO Singapore.
Telkomsel will soon be launching the iPhone after winning the licence from Apple to distribute the handset in Indonesia.
As it will not be offering subsidies for the handsets unlike SingTel and Optus, there will not be an upfront margin erosion or earnings dilution, said Lim Chuan Poh, CEO SingTel International.
SingTel had incurred hefty upfront subsidy costs in its fiscal Q2 in a bid to boost take-up of the iPhone in Singapore by reducing the handset retail price.
With an eye on managing costs, Ms Chua said the group has reduced discretionary spending, sought to improve staff productivity, and undertaken offshoring of call centre services in Australia. Job cuts remain a last resort and the group would first decide to trim variable pay if necessary.
For the nine months ended Dec 31, the group’s operating revenue grew 2.5 per cent to $11.37 billion and net profit slipped 11.2 per cent to $2.55 billion. The group generated free cash flow of $2.27 billion and net debt gearing ratio as at Dec 31 was 25.5 per cent.
Yesterday, SingTel’s share price put on 2.1 per cent or five cents to $2.48.
SingTel – CIMB
Strong operational turnaround
• A little ahead of expectation. Annualised 9MFY09 core net profit was 1% above ours and 2% below consensus due to stronger-than-expected performance at SingTel Singapore and Optus. 3QFY09 core net profit rose 5% qoq but fell 10% yoy to S$838m, ahead of our expectation of S$760m-790m. Key takeaways:
• Strong operational turnaround. Revenues in local currency at both SingTel Singapore and Optus surged 13% qoq and 6% qoq respectively on the back of strong subscriber growth. The 19% qoq decline in the A$ resulted in a 14% qoq dilution in revenue in S$ terms for Optus. Group EBITDA margin rose 1.2%-pts after very weak margin in 2QFY09 when subscriber acquisition and retention costs (SARC) surged due to iPhone subsidies. We believe their aggressive subscriber acquisition efforts of previous quarters are bearing fruits with revenues kicking in.
• Associates weighed down by “fair value losses”. Associate contribution rose nudged 5% qoq due to: 1) the 10% and 5% qoq depreciation of the Indonesian rupiah and Indian rupee against the S$; and 2) fair value losses of S$28m by Telkomsel from foreign currency denominated vendor payables as a result of the weaker rupiah, and S$21m by Bharti on its US$ and Yen denominated borrowings.
• Guidance maintained. SingTel maintained its guidance, which we view positively as it signals no further deterioration in outlook.
• Neutral on industry consolidation in Australia. We are neutral on the consolidation of Vodafone and Hutchison Australia on Optus. While a larger and stronger operator will emerge, it removes an aggressive fourth player (Hutchison) which had been price-disruptive from the market.
• Maintain OUTPERFORM on SingTel with a SOP-based target price of S$3.10 on the operational improvement/turnaround in Singapore and Australia, stabilising regional currencies, strong qoq results among its key units, namely Telkomsel and Bharti.