Category: StarHub
StarHub – Kim Eng
Five stars for good performance
Still a star performer. StarHub has outperformed its two peers, up 5% since early this year. However, it is still a good story for 2012, with potential catalysts from lower subscriber acquisition costs as Android devices appear to be gaining ground. In addition, we expect the new Vodafone roaming alliance to boost ARPUs. TP raised to $3.33, based on target yield of 6% (pegged to the average yield of the top 15 dividend stocks with market cap over $1b under our coverage).
Android gaining ground. We are seeing more Android smartphone users these days. StarHub confirmed that non-Apple handset sales have risen in the last few months. As they break even faster than iPhones, this should have a positive impact on subscriber acquisition costs. It remains to be seen whether this trend will last but we are hopeful as iPhones appear to have lost some lustre.
Vodafone roaming alliance should boost ARPUs. StarHub's new exclusive roaming agreement with Vodafone should help boost its corporate business, given that many multinational corporations have global enterprise arrangements with Vodafone. Typically, ARPU is higher for corporate accounts as executives tend to roam more and use more data services on their mobile phones than consumers.
Yield attractive even without capital management. Capital management is unlikely until year-end, as StarHub is still determining the impact the raised mobile coverage requirements will have on capex, especially the one on outdoor coverage (>99% including any open spaces vs >95% excluding open spaces). Nevertheless, we believe the new requirements will not add substantially to existing capex.
Not going crazy over BPL. StarHub is unlikely to participate in the bid for the 2013-16 seasons for the Barclays Premier League if the price escalates beyond its liking.
Buyback sustained despite higher share price. For the 2011 mandate year, StarHub repurchased 2.1m shares, above 2010's 2m shares, although average cost was 10% higher at $2.87 (up to $2.91). Since the share buyback is another way to enhance shareholder value, other than paying good dividends, the higher average cost is a firm endorsement of the stock's value despite the outperformance.
TELCOs – BT
SingTel, StarHub share prices neck-and-neck
While the former drifts, the latter gains 4% on top of last year’s 11%
THE share prices of telco rivals SingTel and StarHub have been within spitting distance of one another over the last week, for the first time since 2006.
As SingTel’s share price spent the year either moving sideways or in slight decline, StarHub’s price has picked up considerably, narrowing the share price gap to just three cents yesterday. SingTel closed at $3.11, while StarHub closed at $3.08.
In terms of market capitalisation, however, the two telcos are still worlds apart. SingTel weighs in at the top of the Singapore Exchange with almost $50 billion while StarHub is just over a tenth of that value, at $5.2 billion.
Investors who bought into StarHub stock when it listed in 2004, however, would have made out a lot better than people who bought SingTel stock at the same time.
Excluding dividends, since StarHub went public, it has returned more than 200 per cent, from around 90 cents to about $3 today. During the same period, SingTel’s share price rose about 41 per cent.
For argument’s sake, an investor in M1 – the smallest telco of the three – would have seen a 61 per cent gain in share price over the same period. The counter closed at $2.51 yesterday, having climbed steadily from $2.41 since mid-January. Its market cap now stands at about $2.27 billion.
StarHub stock in particular saw a stellar 2011, recording the largest share price gain among the telcos – slightly over 10 per cent. Since the start of the year, it has chalked up an additional 4 per cent in gains.
In contrast this year, SingTel has spent the year knocking about sideways, starting the year at $3.14 and closing trading yesterday at $3.11. Nomura analysts noted in February that this rangebound trading has been going on for a while.
‘The stock has been stuck in a trading range of around $2.80-3.40 for the past two years . . . We do not see too many scenarios of it breaking this trading range, unless there is some possible business restructure,’ the Nomura report said.
That restructuring recently came to fruition when SingTel announced a full-scale organisational overhaul with a new emphasis on the digital sector. Even so, CIMB analyst Kelvin Goh – who holds a ‘neutral’ rating on SingTel with a target price of $3.36 – remained ‘cautious on SingTel as we think its earnings growth will be under pressure from its overseas operations’.
Other analysts are standing by SingTel, with DBS Group Research’s Sachin Mittal deeming it his top pick in Singapore as Bharti looks to gain ground in India. Mr Mittal had a ‘buy’ rating on SingTel with a $3.32 price target at the start of the month.
The sector as a whole, however, gets a vote from OCBC’s Carey Wong, who is overweight on telcos. He has ‘buy’ ratings for all three firms.
‘With markets likely to remain volatile, we believe that the telcos’ defensive earnings and attractive yields offer a safe harbour for the less risk-adverse investors,’ he said in his report.
TELCOs – BT
SingTel, StarHub share prices neck-and-neck
While the former drifts, the latter gains 4% on top of last year’s 11%
THE share prices of telco rivals SingTel and StarHub have been within spitting distance of one another over the last week, for the first time since 2006.
As SingTel’s share price spent the year either moving sideways or in slight decline, StarHub’s price has picked up considerably, narrowing the share price gap to just three cents yesterday. SingTel closed at $3.11, while StarHub closed at $3.08.
In terms of market capitalisation, however, the two telcos are still worlds apart. SingTel weighs in at the top of the Singapore Exchange with almost $50 billion while StarHub is just over a tenth of that value, at $5.2 billion.
Investors who bought into StarHub stock when it listed in 2004, however, would have made out a lot better than people who bought SingTel stock at the same time.
Excluding dividends, since StarHub went public, it has returned more than 200 per cent, from around 90 cents to about $3 today. During the same period, SingTel’s share price rose about 41 per cent.
For argument’s sake, an investor in M1 – the smallest telco of the three – would have seen a 61 per cent gain in share price over the same period. The counter closed at $2.51 yesterday, having climbed steadily from $2.41 since mid-January. Its market cap now stands at about $2.27 billion.
StarHub stock in particular saw a stellar 2011, recording the largest share price gain among the telcos – slightly over 10 per cent. Since the start of the year, it has chalked up an additional 4 per cent in gains.
In contrast this year, SingTel has spent the year knocking about sideways, starting the year at $3.14 and closing trading yesterday at $3.11. Nomura analysts noted in February that this rangebound trading has been going on for a while.
‘The stock has been stuck in a trading range of around $2.80-3.40 for the past two years . . . We do not see too many scenarios of it breaking this trading range, unless there is some possible business restructure,’ the Nomura report said.
That restructuring recently came to fruition when SingTel announced a full-scale organisational overhaul with a new emphasis on the digital sector. Even so, CIMB analyst Kelvin Goh – who holds a ‘neutral’ rating on SingTel with a target price of $3.36 – remained ‘cautious on SingTel as we think its earnings growth will be under pressure from its overseas operations’.
Other analysts are standing by SingTel, with DBS Group Research’s Sachin Mittal deeming it his top pick in Singapore as Bharti looks to gain ground in India. Mr Mittal had a ‘buy’ rating on SingTel with a $3.32 price target at the start of the month.
The sector as a whole, however, gets a vote from OCBC’s Carey Wong, who is overweight on telcos. He has ‘buy’ ratings for all three firms.
‘With markets likely to remain volatile, we believe that the telcos’ defensive earnings and attractive yields offer a safe harbour for the less risk-adverse investors,’ he said in his report.
TELCOs – OCBC
4QCY11 REVIEW – OVERWEIGHT
•Mobile business still resilient
•Stable 2012 outlook
•Defensive earnings, attractive yields
Decent 4CY11 showing from M1, StarHub
Both M1 and StarHub both met our forecasts at the recent 4QCY11 results, although SingTel slightly disappointed due to its volatile Associates contribution. StarHub declared a quarterly dividend of S$0.05/share, while M1 declared a final dividend of S$0.079/share.
Review of Singapore mobile operations
SingTel continues to dominate with a ~47% post-paid market share, followed by StarHub with ~28% and M1 ~26%. Overall, the post-paid subscriber base grew by 62k QoQ to 4029k, with the bulk coming from SingTel (+44k). And due to limited availability of iPhone 4S handsets, we note that all the three telcos saw increased monthly churn, with M1 having highest (1.4%). Both SingTel and StarHub recorded modest improvements in monthly ARPUs while M1 saw a slight decline. Meanwhile, comments from all the three telcos suggest that a revamp of the generous data package currently for smartphones is likely when they launch LTE later this year.
Stable 2012 outlook
Going forward, all the three telcos expect their Singapore operations to remain stable or show modest growth, buoyed by continued customer additions and increasing mobile data usage. But with more smartphone users likely to use data-based means to communicate, we expect EBITDA margins to remain flat or even trend slightly lower. Nevertheless, the telcos have kept their dividend payout guidance, thus keeping their yields attractive.
Maintain OVERWEIGHT
The telco shares have underperformed the broader market YTD, whereas the STI has surged some 12.6%. But with markets likely to remain volatile, we believe that the telcos’ defensive earnings and attractive yields offer a safe harbour for the less risk-adverse investors. Maintain OVERWEIGHT.
TELCOs – OCBC
4QCY11 REVIEW – OVERWEIGHT
•Mobile business still resilient
•Stable 2012 outlook
•Defensive earnings, attractive yields
Decent 4CY11 showing from M1, StarHub
Both M1 and StarHub both met our forecasts at the recent 4QCY11 results, although SingTel slightly disappointed due to its volatile Associates contribution. StarHub declared a quarterly dividend of S$0.05/share, while M1 declared a final dividend of S$0.079/share.
Review of Singapore mobile operations
SingTel continues to dominate with a ~47% post-paid market share, followed by StarHub with ~28% and M1 ~26%. Overall, the post-paid subscriber base grew by 62k QoQ to 4029k, with the bulk coming from SingTel (+44k). And due to limited availability of iPhone 4S handsets, we note that all the three telcos saw increased monthly churn, with M1 having highest (1.4%). Both SingTel and StarHub recorded modest improvements in monthly ARPUs while M1 saw a slight decline. Meanwhile, comments from all the three telcos suggest that a revamp of the generous data package currently for smartphones is likely when they launch LTE later this year.
Stable 2012 outlook
Going forward, all the three telcos expect their Singapore operations to remain stable or show modest growth, buoyed by continued customer additions and increasing mobile data usage. But with more smartphone users likely to use data-based means to communicate, we expect EBITDA margins to remain flat or even trend slightly lower. Nevertheless, the telcos have kept their dividend payout guidance, thus keeping their yields attractive.
Maintain OVERWEIGHT
The telco shares have underperformed the broader market YTD, whereas the STI has surged some 12.6%. But with markets likely to remain volatile, we believe that the telcos’ defensive earnings and attractive yields offer a safe harbour for the less risk-adverse investors. Maintain OVERWEIGHT.