Author: kktan
StarHub – OCBC
1Q12 RESULTS SLIGHTLY AHEAD
•1Q12 results slightly ahead
•Keeps previous guidance for 2012
•No capital measures likely
1Q12 results slightly ahead
StarHub Ltd saw 1Q12 revenue climbed 5.8% YoY (but eased 3.5% QoQ) to S$590.9m, or just 2% shy of our forecast, driven by higher service revenue from all lines of business, and increased revenue from sales of equipment (+52% YoY on more sales of higher-priced smart phones and tablets). Net profit jumped 27.0% YoY (down 4.6% QoQ) to S$88.3m; while the figure was nearly 13.2% ahead of our forecast, we note that the increase came mainly from the NBN roll-out – higher adoption grants and also higher amortised income. Otherwise, operating EBITDA margin of 32.2% was in line with our forecast. And as expected, StarHub has declared a quarterly dividend of
S$0.05/share.
Maintains previous guidance
Going forward, StarHub has maintained its previous guidance for the rest of the year, citing the uncertainties brought on by the European debt crisis etc. As such, management is keeping its revenue growth guidance in the low single-digit range and expects EBITDA margin on service revenue to remain around 30%. Management also warned of potential increase in competition in 2H12, highlighting a potential rush to upgrade handsets as iPhone 4S is due for a renewal soon. Capex should also not be more than 11% of operating revenue. More importantly, the telco has kept its S$0.20/share dividend guidance for 2012; and has also ruled out any capital management moves this
year.
No change to forecasts – Maintain HOLD
As the numbers were mostly in line with our expectation, we are leaving our forecasts unchanged. We also note that the higher adoption grants and amortised income for the NBN roll-out are unlikely to be repeated in the subsequent quarters, or at least not in the same magnitude. Hence, we are also keeping our DCF-based fair value of S$3.10. Maintain HOLD. Note that the market may be slightly disappointed by the lack of capital management initiatives, given that some expectations have been built in by the recent share price outperformance.
StarHub – CIMB
Loosen up, please!
1Q12 core net profit beat our forecast by 4% on strong margin and low depreciation, but we consider it in line as margins may come under pressure from subsidies later this year. StarHub’s performance is 9% above consensus. It also declared a DPS of 5 cts, as expected.
Despite net debt/EBITDA falling to 0.49x from 0.65x qoq, StarHub has no plans to raise its 2012 DPS of 20 cts. We think it should loosen its dividend purse strings. We raise our DCF-based target price to reflect its lower net debt. StarHub remains an Outperform, with expectations of higher dividends being a key catalyst.
A commendable quarter
StarHub’s operational performance was broadly in line except that marketing expenses came in below expectations (Figure 1). This should normalise later in the year, especially when a new device is launched. Broadband ARPU rose for the first time (Figure 4) since its steady decline triggered by competition with SingTel. On the other hand, churns for fixed broadband and pay TV rose on customers not re-contracting after the promotions ended.
No capital management
Net debt/EBITDA fell to 0.5x, the lowest since mid-06 (Fig 3), driven partly by the regulator reimbursing S$44m (2.6cts/share) for reaching NGNBN rollout milestones. Despite the very low gearing, StarHub is maintaining its DPS of 20cts/year for FY12 and it has no plans for any capital management this year. Management acknowledges that gearing is very low but said its conservative stance hinges on competitive and economic uncertainties. We are disappointed by this and believe StarHub is overly conservative and should loosen up its dividend purse strings.
Competition to pick up
Management thinks that competition and subsidies may rise again with the launch of new devices (i.e. iPhone 5). It nevertheless expects subsidy/unit to trend down over time. StarHub noted that Android phones, which are cheaper now, make up 50% of sales with Apple making up the remaining 50% vs. 25%/75% Android/iPhone 6 months ago.
StarHub – CIMB
Loosen up, please!
1Q12 core net profit beat our forecast by 4% on strong margin and low depreciation, but we consider it in line as margins may come under pressure from subsidies later this year. StarHub’s performance is 9% above consensus. It also declared a DPS of 5 cts, as expected.
Despite net debt/EBITDA falling to 0.49x from 0.65x qoq, StarHub has no plans to raise its 2012 DPS of 20 cts. We think it should loosen its dividend purse strings. We raise our DCF-based target price to reflect its lower net debt. StarHub remains an Outperform, with expectations of higher dividends being a key catalyst.
A commendable quarter
StarHub’s operational performance was broadly in line except that marketing expenses came in below expectations (Figure 1). This should normalise later in the year, especially when a new device is launched. Broadband ARPU rose for the first time (Figure 4) since its steady decline triggered by competition with SingTel. On the other hand, churns for fixed broadband and pay TV rose on customers not re-contracting after the promotions ended.
No capital management
Net debt/EBITDA fell to 0.5x, the lowest since mid-06 (Fig 3), driven partly by the regulator reimbursing S$44m (2.6cts/share) for reaching NGNBN rollout milestones. Despite the very low gearing, StarHub is maintaining its DPS of 20cts/year for FY12 and it has no plans for any capital management this year. Management acknowledges that gearing is very low but said its conservative stance hinges on competitive and economic uncertainties. We are disappointed by this and believe StarHub is overly conservative and should loosen up its dividend purse strings.
Competition to pick up
Management thinks that competition and subsidies may rise again with the launch of new devices (i.e. iPhone 5). It nevertheless expects subsidy/unit to trend down over time. StarHub noted that Android phones, which are cheaper now, make up 50% of sales with Apple making up the remaining 50% vs. 25%/75% Android/iPhone 6 months ago.
SMRT – TODAY
Circle Line to increase capacity by 60 per cent
The Circle Line's capacity will be ramped up by 60 per cent, with 24 more trains to be added progressively from 2015, said Transport Minister Lui Tuck Yew today.
Minister Lui was speaking at the groundbreaking ceremony for the Tuas West extension. The extension will see four stations added to the East-West Line, starting from Joo Koon: Gul Circle, Tuas Crescent, Tuas West Road and Tuas Link. There will also be a 26-hectare depot.
The Tuas West extension is expected to benefit more than 100,000 commuters daily. The four stations will be located close to offices and factories to help reduce travelling time by up to 35 minutes for many commuters.
Even as the rail network is being expanded, capacity will also be improved in the coming years, said Minister Lui.
Twenty-four trains will be added into the Circle Line's progressively from 2015, instead of the 16 previously announced. This will increase the Circle Line's capacity by 60 per cent.
During the ceremony, Minister Lui said the government and train operators will spare no effort in making the rail system more reliable.
The transport minister noted the concerns over serious trains disruptions in recent months. He said SMRT will put in place a more robust system to anticipate potential faults and vulnerabilities in the system.
On the recently-announced S$900 million plan to upgrade and renew ageing assets, Mr Lui said two main components will contribute to the costs. One is replacing the sleepers of the track, while the other is upgrading of the signalling system.
He said the Land Transport Authority (LTA) and SMRT are in the process of making sure that each party will pay a "fair share of the costs".
"Broadly speaking, I think the formulation is that infrastructural works should come under the government and the replacement of operating assets comes under the operator," Mr Lui said. "There is a formula on how to share the costs so what is happening now between LTA and SMRT is that they are going to through the details and making sure that each party is paying its fair share of the costs."
On whether the costs will eventually be passed on to commuters as higher fares, Mr Lui said fares are determined by the fare adjustment formula, which is being reviewed. He also said fares will not be adjusted this year while the review is underway. CHANNEL NEWSASIA
SMRT – TODAY
Circle Line to increase capacity by 60 per cent
The Circle Line's capacity will be ramped up by 60 per cent, with 24 more trains to be added progressively from 2015, said Transport Minister Lui Tuck Yew today.
Minister Lui was speaking at the groundbreaking ceremony for the Tuas West extension. The extension will see four stations added to the East-West Line, starting from Joo Koon: Gul Circle, Tuas Crescent, Tuas West Road and Tuas Link. There will also be a 26-hectare depot.
The Tuas West extension is expected to benefit more than 100,000 commuters daily. The four stations will be located close to offices and factories to help reduce travelling time by up to 35 minutes for many commuters.
Even as the rail network is being expanded, capacity will also be improved in the coming years, said Minister Lui.
Twenty-four trains will be added into the Circle Line's progressively from 2015, instead of the 16 previously announced. This will increase the Circle Line's capacity by 60 per cent.
During the ceremony, Minister Lui said the government and train operators will spare no effort in making the rail system more reliable.
The transport minister noted the concerns over serious trains disruptions in recent months. He said SMRT will put in place a more robust system to anticipate potential faults and vulnerabilities in the system.
On the recently-announced S$900 million plan to upgrade and renew ageing assets, Mr Lui said two main components will contribute to the costs. One is replacing the sleepers of the track, while the other is upgrading of the signalling system.
He said the Land Transport Authority (LTA) and SMRT are in the process of making sure that each party will pay a "fair share of the costs".
"Broadly speaking, I think the formulation is that infrastructural works should come under the government and the replacement of operating assets comes under the operator," Mr Lui said. "There is a formula on how to share the costs so what is happening now between LTA and SMRT is that they are going to through the details and making sure that each party is paying its fair share of the costs."
On whether the costs will eventually be passed on to commuters as higher fares, Mr Lui said fares are determined by the fare adjustment formula, which is being reviewed. He also said fares will not be adjusted this year while the review is underway. CHANNEL NEWSASIA