Author: kktan
StarHub – BT
StarHub takes a short cut to TVB dramas
STARHUB is polishing the crown jewel of its Chinese programming by bringing popular Hong Kong drama series to local screens a month after their home debut.
This perk will be extended to the firm’s cable television customers from June, thanks to a recent change in the licensing policy of Hong Kong television producer TVB.
TVB drama series enjoy a strong local following but previously, StarHub could only gain access to them some three months after their broadcast in Hong Kong. This is because these programmes are first released to the video rental market before being distributed to operators.
However, TVB decided to reduce the timeframe for pay-TV companies as some consumers have been illegally downloading its programmes after their Hong Kong broadcast.
‘This (illegal downloading) is jeopardising our interest so we decided to shorten the window,’ said Sherman Lee, controller of the telecast licensing division at TVB’s international arm TVBI.
TVB content is currently carried on 10 StarHub channels, of which three are so-called video-on-demand (VOD) offerings.
This means that the programmes do not follow a fixed schedule and can instead be called up instantly by the user. The latest TVB drama series will first be carried over these VOD channels.
‘TVB is another important source of content for us aside from the BPL (Barclays Premier League),’ said StarHub’s chief operating officer Tan Tong Hai at a media conference yesterday.
Beyond expediting access to TVB content, some of the programmes will also be offered in high-definition and on StarHub’s mobile and broadband platforms, he added.
SPH – DBS
Ad to your portfolio
• Recent correction brings further value on the back of improving fundamentals
• Strong Apr AdEx growth of 31% yoy, even stronger than Mar’s 23% yoy growth
• Ad yields on the rise, with more creative ads
• Reiterate Buy; sum-of-parts TP: S$4.42.
AdEx for display and classifieds surged 31% yoy in Apr. With the recent price correction, we believe there is even better value as latest Apr data from Nielsen Media Research shows that AdEx for Display and Classifieds Ads surged 31% yoy, higher than the 23% for Mar. Although the strong growth in the past 2 months could partly be due to the low base effect last year, at the depth of the recession, we expect the growth trend to continue, albeit at a slower rate. Based on SPH’s financial year, YTD AdEx (Sep’09 – Apr’10) is up 11.5% yoy.
Ad yields are improving with more creative ads, World Cup, property launches. There have been more creative ads, for instance the ones carried in 3-D format (12 May ST edition) and an 8-page wrap-around full colour leaflet ad for the launch of a new car model (22 May). Such special colour ads improve yields for SPH. While these could be one-offs, it signifies that advertisers have been more receptive to creativity in terms of ad delivery in traditional newspapers. In addition, the late confirmation of the FIFA World Cup broadcasting rights for Singapore could also swing advertisers towards print, from TV, given the short lead-time. The large number of property sites for tender could also mean sustainability of property launch ads well into 2011.
Reiterate Buy recommendation, TP: S$4.42. 3Q results should be announced in the week commencing 12 July. We believe operating numbers should continue to show better growth from 2Q. We reiterate our Buy recommendation with our sum-of-parts TP at S$4.42. In our view, the recent sell-down looks overdone on the back of firm fundamentals. Dividend yield is also attractive at c.7%.
SMRT – BT
Time to board the train
Sell-down likely overdone. SMRT’s share price immediately slumped by 5.7% the next trading day following its 4QFY10 results, as a hike in its operating expenses (opex) had caused the bottomline to miss market’s expectations. We reckon that the market, which may have been overly optimistic previously, is now concerned that the ramp up of the Circle Line (CCL) may damp its profitability going forward, if its 4Q opex is used as a new baseline to estimate the incremental costs. However, our analysis of its historical quarterly opex shows that the 4Q results may possibly include an element of seasonality. Specifically, we observe that opex as a percentage of revenue is traditionally higher in 4Q, due possibly to year-end maintenance or staff bonuses, etc. Therefore, while we acknowledge that its 4Q results, to a certain extent, were impacted by operating costs from CCL, we believe that its most recent 4Q opex may not be the best reference point for its expected costs and that the sell-down due to this issue may be been overdone.
Healthy operating statistics. Operationally, we are still keenly positive on its developments of its core business segments. Monthly statistics provided by SMRT showed that the total monthly MRT ridership had jumped by 12.0% YoY (-2.2% MoM) in Apr, as opposed to 2.3% YoY growth (-4.4% MoM) in Apr 2009. Its monthly bus ridership similarly clocked a robust YoY growth of 6.3% (+13.8% MoM) in Mar, indicating healthy growth momentum in its bus operations. While management does not disclose the monthly progress on its rental space, we are optimistic that the group will be able to achieve a S$6m increase (+9.2%) in rental revenue for FY11 (as guided by management), considering the addition of rental space and encouraging take-up rates at Esplanade Exchange.
Upgrade to BUY. In the longer term, we continue to like SMRT for its growth story in the public transport sector space, its consistently strong operating cashflows and dividend payouts. We maintain our view that the group is likely to capture a significantly higher ridership with the progressive opening of CCL stations (LTA expects ridership of 0.5m/day, when fully operational). Together with a return of tourism, opening of integrated resorts and major events (e.g. F1 Grand Prix, YOG), that should bolster its performance in FY11. We are upgrading SMRT to BUY with S$2.33 fair value (maintained) as the recent weakness in its share price now presents a good opportunity to accumulate the stock.
SingTel – BT
Bharti’s pan-India 3G plan foiled by hot bids
Group paying 123 billion rupees for permits in 13 of the 22 regions
Bharti Airtel Ltd, India’s largest carrier and a unit of Singapore Telecommunications Ltd, scrapped plans to offer nationwide high-speed mobile phone services after bidding in a government auction drove prices ‘beyond reasonable levels.’
India’s 34-day auction of third-generation licences for airwaves in its 22 telecommunications zones ended on Wednesday with none of the nine approved bidders buying all the permits for national coverage. The auction raised 677.2 billion rupees (S$20.4 billion) for the government.
‘I am sure every pan-Indian operator would love to get their hands on pan-Indian spectrum, but the price needs to be right,’ Theo Maas, who owns Bharti shareholder Singapore Telecommunications Ltd as part of the US$4.5 billion in assets he oversees at Arnhem Investment Management in Sydney, said.
As bids surged beyond initial expectations, there was a ‘trade-off that every operator would make,’ he said.
The licence prices stoked concern that carriers won’t be able to recoup their investment from a market where calls cost a penny a minute, the cheapest in the world.
France Telecom SA and Deutsche Telekom AG posted record losses after European phone companies paid more than US$100 billion to buy 3G licences a decade ago.
‘The auction format and severe spectrum shortage along with ensuing policy uncertainty drove the prices beyond reasonable levels,’ Bharti, which is paying 123 billion rupees for permits in 13 of the 22 regions, said in a statement on Wednesday.
‘As a result, we could not achieve our objective of pan-India 3G footprint.’
In some areas of the country, building new base stations and towers might have been a cheaper alternative to buying new spectrum, according to Arnhem’s Mr Maas.
Bharti rose one per cent to 262.4 rupees at 11.33 am in Mumbai trading yesterday, while Reliance Communications added 1.7 per cent to 139 rupees, and Idea Cellular Ltd climbed 4.3 per cent.
Bharti has fallen 16 per cent since the auction began on April 9, while Reliance dropped 24 per cent, and Idea Cellular Ltd slumped 22 per cent.
That compares with an 8.5 per cent decline for the benchmark Sensex index in the same period.
Morgan Stanley raised its investment rating for India’s telecommunications companies yesterday to ‘in-line’ from ‘cautious,’ citing the removal of uncertainty over the pricing of third-generation spectrum with the conclusion of the auction, as well as stability in the region’s tariff wars.
The proceeds from the auction exceed the 350 billion rupees Finance Minister Pranab Mukherjee projected in his budget, and may help the government meet a target of shrinking the budget deficit by more than one percentage point of gross domestic product, the sharpest cut in 19 years.
On May 11, India’s telecommunications regulator said prices for 3G spectrum established through the auction should be used as a base to charge for second-generation airwaves.
The recommendation threatens to raise costs for mobile-phone companies.
The lack of clarity on regulations ‘gets worse by the day,’ Mark James, an analyst with Liberum Capital Ltd, said from London before the auction ended. — Bloomberg
SingTel – UBS
Concerns in Indonesia
• Telkomsel may be the loser in the competition for data, in our view
In the past two quarters, 70% of revenue growth in Indonesia wireless was from data. We believe this is not a temporary trend and Telkomsel may be the loser in the competition to grow data revenue. We believe the consumer perception that Telkomsel has the best quality wireless network in Indonesia is at risk. Please refer to today’s UBS report, Indonesia Telecommunication Sector: The rise of data by UBS Indonesia telecom analyst Sebastian Tobing for further details.
• Negative for SingTel, in our view
SingTel is the 35% shareholder of Telkomsel and 17% of our sum-of-the-parts based price target for SingTel comes from Telkomsel. We believe the market views Telkomsel as one of the growth drivers for SingTel.
• Bharti in India also facing difficulties
Bharti, SingTel’s other large overseas associate and potential growth driver, also faces difficulties in the near term. The difficulties are: competition, 3G licence fee and regulatory challenges. We believe the concerns at Bharti and Telkomsel will be an overhang for SingTel shares.
• Valuation: lower price target to S$3.15; retain Neutral rating
Reflecting our lower earnings estimates for Telkomsel, we lower our SingTel EPS forecasts for FY2011/12/13 from S$0.266/0.286/0.316 to S$0.255/0.274/0.301. Our price target, based on a sum-of-the-parts model, is lowered from S$3.22 to S$3.15.