Month: September 2010
StarHub – Daiwa
An attractive dividend yield and the promise of NBN
Upgraded to Outperform
• We have upgraded our rating to 2 (Outperform) from 3 (Hold) and raised our six-month target price to S$2.65, from S$2.17, now based on a DDM (previously DCF) valuation. Based on our forecasts, StarHub offers an attractive dividend yield, and we believe the company is well-positioned to gain share in the corporate market with the launch of the national broadband network (NBN) in 2H10.
NBN opportunities outweigh risks, in our view
• We forecast StarHub’s revenue share of the corporate-services market to rise from 15% for 2009 to 17% by 2012. This is driven by new contract wins with the government and small- to medium-sized enterprises (SME).
Regulatory changes limit pay-TV risks
• The underlying aim of the recent regulatory initiatives is a push towards a single set-top-box solution, in our view. We believe this will limit the long-term risks for StarHub’s pay-TV business and expect the gross-profit margin for this segment to stabilise from 2012.
Robust outlook expected in the mobile segment
• We believe the outlook for the mobile segment is robust. Revenue growth is likely to be driven by a rise in the number of data-plan users and an increase in inbound roaming revenue.
SPH – UOBKH
Worth a trade for FY10’s bumper final dividend
What’s New
• Singapore Press Holdings (SPH) will be announcing FY10’s final dividend in its results release on Tuesday, 12 October.
Stock Impact
• We expect SPH’s share price to rally in the run-up to the release of its FY10 final results on Tuesday, 12 October. This was the case in seven of the last 10 years. The three years that did not mirror this traditional rally were 2000 – due to the tech bubble collapse, 2001 – due to the Sep 11 terrorist attack, and 2008 – the recent global financial meltdown.
• This time round, investors can look forward to a bumper final dividend from SPH given expected strong earnings in FY10. We forecast full-year EPS of 31.7 cents, in line with consensus of 31.6 cents. Our final DPS base-case estimate is 22 cents while our best-case estimate is 24 cents. This translates into a final net dividend yield of 5.4% and 5.9% respectively.
• Investors need not wait for SPH’s actual dividend payout to enjoy the return. History has shown that share price will normally rally in anticipation of the dividend announcement in SPH’s final results. A probable return of >5% in a short period of six weeks is worth a trade.
Earnings Revision/Risk
• No earnings revision. The risk to our final DPS estimate is management’s decision to retain more cash, in view of tempered global economic growth from 2H10 onwards.
Valuation/Recommendation
• Maintain BUY and target price of S$4.50.
Share Price Catalyst
• Near-term share price catalyst is FY10’s final dividend.
SPH – CS
Slower ad revenue growth expected in 4Q
● According to the CS Page Monitor, jobs ad volume moderated to +31% in 4Q FY10 (June-August), from 3Q FY10’s estimated +57%. Non-job classified ad volume fell 10% for the same period, bringing the total classified volume to just +1% YoY.
● Display ad volume grew 8% YoY during 4Q, compared with the estimated +15% in 3Q FY10. The latest page count data supports our view that newspaper ad growth peaked in 3Q FY10. SPH is scheduled to report its 4Q FY10 results on 12 October 2010.
● Nevertheless, we believe SPH will continue to benefit from healthy private consumption growth in Singapore. Overall, the company is a key beneficiary of Singapore’s tight labour market.
● YTD, the stock has risen 11% (and outperformed the STI by 9%), but it is still trading at only 3% P/E premium to the market (excluding contributions from Sky@eleven) versus the 10-year average premium of 30%. As such, we maintain our OUTPERFORM rating. Our SOTP-based target price of S$4.75 represents 16% upside potential. The dividend yield also remains attractive at 6%.
TELCOs – BT
Govt stands its ground on cross-carriage
But pay-TV operators to get more time to implement sharing of exclusive content
The authorities here look set to press ahead with a controversial mandate that compels pay-TV operators to share exclusive programming – despite widespread protests from content suppliers. However, the government has decided to delay the implementation of the policy by up to nine months to give the media industry more time to adjust to the new regime.
The extension was granted by the Media Development Authority (MDA) of Singapore after it carried out a two-month public consultation exercise to obtain feedback on its new cross-carriage policy.
Under the MDA ruling, pay-TV companies must allow competitors to carry exclusive programming they acquire after March 12 this year.
The aim is to tackle the content fragmentation that has started to surface in the local pay-TV market as evidenced by the bitter Barclays Premier League (BPL) tussle between Singapore Telecommunications and StarHub last year.
Exclusive programmes acquired after March 12 were supposed to be extended to other players from this month, but the effective date has now been pushed back to the first half of 2011. This means that if SingTel decides to strike another exclusive deal during the next bidding cycle for the BPL in three year’s time, all matches will have to be made available on StarHub’s cable television channels as well.
As a result, consumers will avoid the pain of forking out additional registration fees, or suffer the inconvenience of having two set-top boxes in their living rooms.
‘We (MDA) do believe fundamentally that wider distribution (of content) will help (the industry). This is the right, the best measure for the market,’ said MDA’s deputy chief executive Michael Yap.
Early results show MDA’s contentious move is already starting to deliver its intended effect. In the six months since the policy was unveiled on March 12, StarHub and SingTel have not signed any exclusive contract, Mr Yap told reporters at a briefing yesterday.
Despite MDA’s claim, the new measure has split public opinion down the middle since its introduction. Consumers and pay-TV outsiders such as M1 clearly welcomed the move as it opens the door to lower subscriptions and new revenue streams.
But content suppliers and a regional media association balked at the MDA mandate as it could complicate business models and slash revenue. This is because pay-TV companies may be reluctant to pay top dollar for premium content such as the BPL after losing the exclusivity trump card.
In May, the Cable & Satellite Broadcasting Association of Asia (Casbaa) launched a rare tirade against the Singapore authorities, accusing MDA of violating international trade agreements through the cross-carriage mandate.
It even said the move could harm Singapore’s economic interests in the long run as investments in the local media scene could dry up. Casbaa represents around 130 of the biggest media companies in the region, including content bigwigs such as Sony Pictures, Fox International Channels, HBO Asia and NBC Universal Global Networks.
In the same month, Casbaa also submitted its official response in the first MDA consultation exercise, along with 18 other organisations.
Content suppliers made up the majority of these respondents, including companies such as HBO, Discovery Asia, Disney-ABC and sports marketing agencies Sportfive and the World Sport Group.
Licensing complications, revenue-sharing and billing complexities were among the major concerns raised by the companies.
In response, MDA has moved to address some of these issues by launching a second round of public consultation yesterday.
As part of this exercise, the regulator shed more light on the types of content that will be affected by the cross-carriage ruling, along with clarifications on a host of other topics ranging from ensuing billing arrangements to service standards.
Only pay-TV programmes on mainstream services such as cable television and SingTel’s mio TV platform are affected. Content that is acquired for broadcast over emerging platforms such as interactive Web TV will not be affected by cross carriage, Mr Yap revealed. The company that acquires exclusive programming will also bill customers directly, including those who view this content through rival platforms.
In addition, if an exclusive programme is bundled as part of a group, the entire group will have to be extended to other pay-TV players, Mr Yap said.
A SingTel spokeswoman said this requirement will ‘level the playing field’ in the local pay-TV sector. ‘SingTel will review MDA’s preliminary positions and provide constructive and positive feedback for its consideration,’ she added.
Rival StarHub continues to stand behind the government’s new policy and said it will work out implementation details with all relevant parties.
When contacted, Casbaa declined to comment directly on MDA’s cross-carriage updates, saying it ‘needs time to digest and consult’ members before taking a formal position. MDA’s second consultation exercise closes on Sept 28 and the regulator will issue a final decision on cross carriage by the end of this year.
TELCOs – BT
Govt stands its ground on cross-carriage
But pay-TV operators to get more time to implement sharing of exclusive content
The authorities here look set to press ahead with a controversial mandate that compels pay-TV operators to share exclusive programming – despite widespread protests from content suppliers. However, the government has decided to delay the implementation of the policy by up to nine months to give the media industry more time to adjust to the new regime.
The extension was granted by the Media Development Authority (MDA) of Singapore after it carried out a two-month public consultation exercise to obtain feedback on its new cross-carriage policy.
Under the MDA ruling, pay-TV companies must allow competitors to carry exclusive programming they acquire after March 12 this year.
The aim is to tackle the content fragmentation that has started to surface in the local pay-TV market as evidenced by the bitter Barclays Premier League (BPL) tussle between Singapore Telecommunications and StarHub last year.
Exclusive programmes acquired after March 12 were supposed to be extended to other players from this month, but the effective date has now been pushed back to the first half of 2011. This means that if SingTel decides to strike another exclusive deal during the next bidding cycle for the BPL in three year’s time, all matches will have to be made available on StarHub’s cable television channels as well.
As a result, consumers will avoid the pain of forking out additional registration fees, or suffer the inconvenience of having two set-top boxes in their living rooms.
‘We (MDA) do believe fundamentally that wider distribution (of content) will help (the industry). This is the right, the best measure for the market,’ said MDA’s deputy chief executive Michael Yap.
Early results show MDA’s contentious move is already starting to deliver its intended effect. In the six months since the policy was unveiled on March 12, StarHub and SingTel have not signed any exclusive contract, Mr Yap told reporters at a briefing yesterday.
Despite MDA’s claim, the new measure has split public opinion down the middle since its introduction. Consumers and pay-TV outsiders such as M1 clearly welcomed the move as it opens the door to lower subscriptions and new revenue streams.
But content suppliers and a regional media association balked at the MDA mandate as it could complicate business models and slash revenue. This is because pay-TV companies may be reluctant to pay top dollar for premium content such as the BPL after losing the exclusivity trump card.
In May, the Cable & Satellite Broadcasting Association of Asia (Casbaa) launched a rare tirade against the Singapore authorities, accusing MDA of violating international trade agreements through the cross-carriage mandate.
It even said the move could harm Singapore’s economic interests in the long run as investments in the local media scene could dry up. Casbaa represents around 130 of the biggest media companies in the region, including content bigwigs such as Sony Pictures, Fox International Channels, HBO Asia and NBC Universal Global Networks.
In the same month, Casbaa also submitted its official response in the first MDA consultation exercise, along with 18 other organisations.
Content suppliers made up the majority of these respondents, including companies such as HBO, Discovery Asia, Disney-ABC and sports marketing agencies Sportfive and the World Sport Group.
Licensing complications, revenue-sharing and billing complexities were among the major concerns raised by the companies.
In response, MDA has moved to address some of these issues by launching a second round of public consultation yesterday.
As part of this exercise, the regulator shed more light on the types of content that will be affected by the cross-carriage ruling, along with clarifications on a host of other topics ranging from ensuing billing arrangements to service standards.
Only pay-TV programmes on mainstream services such as cable television and SingTel’s mio TV platform are affected. Content that is acquired for broadcast over emerging platforms such as interactive Web TV will not be affected by cross carriage, Mr Yap revealed. The company that acquires exclusive programming will also bill customers directly, including those who view this content through rival platforms.
In addition, if an exclusive programme is bundled as part of a group, the entire group will have to be extended to other pay-TV players, Mr Yap said.
A SingTel spokeswoman said this requirement will ‘level the playing field’ in the local pay-TV sector. ‘SingTel will review MDA’s preliminary positions and provide constructive and positive feedback for its consideration,’ she added.
Rival StarHub continues to stand behind the government’s new policy and said it will work out implementation details with all relevant parties.
When contacted, Casbaa declined to comment directly on MDA’s cross-carriage updates, saying it ‘needs time to digest and consult’ members before taking a formal position. MDA’s second consultation exercise closes on Sept 28 and the regulator will issue a final decision on cross carriage by the end of this year.