Category: StarHub
StarHub – BT
StarHub’s Q4 net profit up 15.1% at $92.6m
Mobile business main Q4 revenue driver at $312.2m, up 3.1%
STEADY performance from its mobile and broadband businesses pushed StarHub’s net profit for 2011 to $315.5 million, up 19.9 per cent from the previous year.
The triple-play provider saw fourth-quarter net profit grow 15.1 per cent to hit $92.6 million.
Q4 and full-year operating revenues rose 9.6 per cent to $612.6 million and 3.3 per cent to $2.31 billion respectively.
Mobile revenue – still the main contributor to StarHub’s business at 51 per cent in the last quarter of 2011 – grew 3.1 per cent over the corresponding period the year before, to $312.2 million. For the year, mobile revenue was $1.22 billion, up 3.1 per cent over 2010.
One factor driving mobile revenues was increased Arpu (average revenue per user) as Singapore’s smartphone-savvy population continued to spend more on mobile services and data, said StarHub’s chief operating officer Tan Tong Hai.
He said mobile post- paid revenue grew 6 per cent, and that non-voice services contributed 39.8 per cent of Arpu for the customer segment in Q4. ‘This reflects steady growth in mobile usage.’
The company is looking to mobile services growth to bolster the segment, since the country’s subscriber base is fairly saturated at 149 per cent, so growth by absolute numbers will be slow.
Post-paid Arpu stood at $74 for the year, up from $72 in 2010. Its post-paid base was 1.06 million users, 30,000 more than the previous year.
In contrast, while StarHub added 16,000 more pre-paid customers to total 1.12 million in the segment, its Arpu continued to decline as fewer consumed mobile services. As a result, pre-paid mobile services revenue dropped 6 per cent to $249.4 million over the year.
Its second pillar of revenue, its broadband business, took in $60.6 million for the fourth quarter and $241.7 million for the year, representing a growth of 2.7 per cent and 2.4 per cent over the same periods the year before.
The company’s fixed network services revenue also rose 3 per cent to hit $88 million in the fourth quarter, and 1.5 per cent to $336.7 million for the year.
The provider, which started rolling out services on the next-generation fibre nationwide broadband network (NBN) last year, started seeing those subscriptions contributing to its data and Internet services portfolio.
StarHub CEO Neil Montefiore noted that this contribution remains low for now, as the country’s base of subscribers starts to ramp up and as infrastructure owner OpenNet continues to cover the island.
The company’s pay cable TV revenue dipped from the year before, however, since StarHub lost exclusive broadcast rights to the Barclays Premier League (BPL) to SingTel. Revenue for 2011 was $376 million, dropping $19.4 million from 2010, as the company was forced to drop its ‘sports’ content subscription price. The company also said 2010’s revenues benefited from the FIFA World Cup.
Mr Montefiore pointed out that pay-TV revenue has since stabilised, and that its number of subscribers stood at 545,000 as at Dec 31, 2011, compared with 538,000 at end-2010.
StarHub estimates it had 45.2 per cent share of the country’s pay-TV market by the end of 2011.
Renewing pay-TV content and set-top boxes contributed to a rise in capex, commented Kwek Buck Chye, StarHub’s chief financial officer.
Higher sub-contractor costs for the company’s infrastructure expansion efforts also added to capex.
The group’s operating expenses (including cost of sales) went up 1.8 per cent to hit $1.94 billion. Higher marketing and staff costs were mitigated by lower other expenses such as maintenance and operating leases. It ended the year with cash and cash equivalents of $179.2 million, and is recommending a final fourth quarter dividend of 5 cents per share. It intends to maintain its annual cash payout of 20 cents at the end of this year.
The counter closed one cent higher at $2.83 yesterday.
The telco is also one of the first to acquire a vanity top-level domain name, ‘.starhub’, and has paid US$185,000 for the privilege.
StarHub – BT
StarHub’s Q4 net profit up 15.1% at $92.6m
Mobile business main Q4 revenue driver at $312.2m, up 3.1%
STEADY performance from its mobile and broadband businesses pushed StarHub’s net profit for 2011 to $315.5 million, up 19.9 per cent from the previous year.
The triple-play provider saw fourth-quarter net profit grow 15.1 per cent to hit $92.6 million.
Q4 and full-year operating revenues rose 9.6 per cent to $612.6 million and 3.3 per cent to $2.31 billion respectively.
Mobile revenue – still the main contributor to StarHub’s business at 51 per cent in the last quarter of 2011 – grew 3.1 per cent over the corresponding period the year before, to $312.2 million. For the year, mobile revenue was $1.22 billion, up 3.1 per cent over 2010.
One factor driving mobile revenues was increased Arpu (average revenue per user) as Singapore’s smartphone-savvy population continued to spend more on mobile services and data, said StarHub’s chief operating officer Tan Tong Hai.
He said mobile post- paid revenue grew 6 per cent, and that non-voice services contributed 39.8 per cent of Arpu for the customer segment in Q4. ‘This reflects steady growth in mobile usage.’
The company is looking to mobile services growth to bolster the segment, since the country’s subscriber base is fairly saturated at 149 per cent, so growth by absolute numbers will be slow.
Post-paid Arpu stood at $74 for the year, up from $72 in 2010. Its post-paid base was 1.06 million users, 30,000 more than the previous year.
In contrast, while StarHub added 16,000 more pre-paid customers to total 1.12 million in the segment, its Arpu continued to decline as fewer consumed mobile services. As a result, pre-paid mobile services revenue dropped 6 per cent to $249.4 million over the year.
Its second pillar of revenue, its broadband business, took in $60.6 million for the fourth quarter and $241.7 million for the year, representing a growth of 2.7 per cent and 2.4 per cent over the same periods the year before.
The company’s fixed network services revenue also rose 3 per cent to hit $88 million in the fourth quarter, and 1.5 per cent to $336.7 million for the year.
The provider, which started rolling out services on the next-generation fibre nationwide broadband network (NBN) last year, started seeing those subscriptions contributing to its data and Internet services portfolio.
StarHub CEO Neil Montefiore noted that this contribution remains low for now, as the country’s base of subscribers starts to ramp up and as infrastructure owner OpenNet continues to cover the island.
The company’s pay cable TV revenue dipped from the year before, however, since StarHub lost exclusive broadcast rights to the Barclays Premier League (BPL) to SingTel. Revenue for 2011 was $376 million, dropping $19.4 million from 2010, as the company was forced to drop its ‘sports’ content subscription price. The company also said 2010’s revenues benefited from the FIFA World Cup.
Mr Montefiore pointed out that pay-TV revenue has since stabilised, and that its number of subscribers stood at 545,000 as at Dec 31, 2011, compared with 538,000 at end-2010.
StarHub estimates it had 45.2 per cent share of the country’s pay-TV market by the end of 2011.
Renewing pay-TV content and set-top boxes contributed to a rise in capex, commented Kwek Buck Chye, StarHub’s chief financial officer.
Higher sub-contractor costs for the company’s infrastructure expansion efforts also added to capex.
The group’s operating expenses (including cost of sales) went up 1.8 per cent to hit $1.94 billion. Higher marketing and staff costs were mitigated by lower other expenses such as maintenance and operating leases. It ended the year with cash and cash equivalents of $179.2 million, and is recommending a final fourth quarter dividend of 5 cents per share. It intends to maintain its annual cash payout of 20 cents at the end of this year.
The counter closed one cent higher at $2.83 yesterday.
The telco is also one of the first to acquire a vanity top-level domain name, ‘.starhub’, and has paid US$185,000 for the privilege.
StarHub – Kim Eng
Hold on for more
Hold on despite possible 4Q miss. StarHub is slated to release its full-year FY11 results on 2 February. We would not be surprised to see a lower-than-forecast net profit, given the stronger-than-expected demand for iPhone 4S. On the bright side, competition is easing and we expect content costs to remain subdued while its low gearing suggests the potential for dividends to be maintained and even enhanced this year when economic headwinds die down. Maintain Buy.
Expect subdued margins. Our full-year revenue forecast of $302.7m suggests a 4Q11 net profit of $79.8m and EBITDA margin on service revenue of 31%. While this is in line with management’s full-year guidance of “about 30%” (9M11 margin was 30.4%), we would not be surprised by a lower-than-forecast EBITDA margin in 4Q11 due to the robust demand for iPhone 4S.
Good and bad of strong iPhone 4S demand. Despite the slight difference between iPhone 4 and iPhone 4S, the demand for the latter has been unusually strong since its launch last October, and is likely to last into 1Q12. While bad from a subsidy perspective, the robust sales were good in that they suggest data usage by iPhone 4S users is twice that of iPhone 4 users and three times more than 3GS users, likely due to Siri. Better data monetisation in future should bring benefits to ARPU.
Competition easing, content costs under control. On the bright side, competition in broadband and Pay TV appear to have been tamed, and content costs should remain subdued, as challenger SingTel is likely to hold back from making aggressive moves now that the cross-carriage law is in effect. For example, it did not push aggressively for the World Cup or Fox International Channels.
Dividend likely maintained, with scope for a raise. StarHub will likely keep its DPS at 20 cents in 2012. It could even pay more, as competition has eased and gearing has fallen. Net debt/EBITDA hit 0.69x in 3Q11, giving it ample headroom to its target of 1.5x. Assuming a range of 1-1.2x, StarHub could pay 6-15 cents more on top of the regular dividend. The last time it did a capital reduction was in 1Q07 (25.6 cents a share) when gearing fell to 0.7x. Reiterate Buy.
TELCOs – BT
Telcos top picks in two outlook reports as volatility persists
M1, SingTel, DBS, Frasers Centrepoint Trust have emerged as key ‘buy’ calls
WITH global uncertainties carrying over from 2011 into the new year, telecommunications stocks have once again come up as top picks in two market outlook and strategy reports.
M1, SingTel, DBS, and Frasers Centrepoint Trust, in particular, have emerged as key ‘buy’ calls from both UOB Kay Hian Research and OCBC Bank’s Wealth Panel, in separate reports released on Friday.
Forecasting a 2012 Straits Times Index (STI) price to earnings (PE) ratio of 12.1x, UOB Kay Hian said the index’s valuation is ‘undemanding’ – at a 26 per cent discount to its long-term PE mean of 16.3x (since 1993).
‘Nevertheless, we think the discount may remain elevated in the near term, given the uncertain prospects for 2012 corporate earnings and lingering concerns over the euro debt crisis,’ said UOB Kay Hian.
The research house said investors should opt for a balance of sustainable high-yield stocks, selective retail Reits, and ‘undervalued laggards with specific stock catalysts’.
Apart from the telcos, UOB Kay Hian’s key ‘buys’ included CapitaLand and Ezion, while City Developments and NOL sat in its key ‘sells’ list. It also recently upgraded Wing Tai and Ho Bee to ‘buys’ due to their deep value after sharp share price corrections in December last year.
Meanwhile, OCBC Investment Research head Carmen Lee warned that even though share prices appear to have discounted weaker earnings expectations, ‘they may not have been fully priced in the worst case scenario’.
Said Ms Lee: ‘If the outlook deteriorates significantly, earnings estimates will need to be shaved further.’
With volatility persisting and investor confidence remaining fragile, the OCBC Wealth Panel said that it prefers quality and safer assets, and high dividend yielding defensive stocks.
Telecommunications aside, the OCBC team said that they continue to favour the healthcare and oil and gas sectors in 2012. Its picks for the year include Raffles Medical, Keppel Corp, Sembcorp Marine, Biosensors, and Golden Agri-Resources.
TELCOs – DBSV
Hostile non-mobile
• Mobile sector could benefit from lower data-cap and adoption of Android phones.
• Intense competition in broadband and structural changes in pay TV may outweigh the positives.
• StarHub outperformed STI by 32% in 2011, downgrade to HOLD. Prefer SingTel on valuation grounds despite hiccups from weak Indian Rupee
Positive signs emerging in the mobile sector. Firstly, telcos are offering faster speeds (4G) and better quality of service (priority pass to premium customers), to encourage users to adopt lower data-cap. During 4G launch in Dec 2011, SingTel capped 4G data at 10GB versus 50GB on 3G and intends to lower 3G data cap with more 4G roll out in 2012 (see Table 1 on next page). Lower data-cap is likely to enhance data-revenue. Secondly, Android phones from Samsung & HTC support 4G and Near Field Communication (NFC), not available on iPhone yet. 4G support is crucial as telcos may start to offer 4G over smart phones by mid 2012. Besides NFC enabled phones will allow users to “tap” and pay at over 20K retail points and taxis from June 2012 onwards. Telcos stand to benefit from lower handset subsidies (than iPhone) and revenue sharing for certain Apps on Android platform.
StarHub faces uphill task in consumer broadband. StarHub offers broadband speeds of 50 & 100 Mbps on its Hybrid Co-axial Cable (HFC) network compared to SingTel offering up to 15 Mbps using ADSL technology. As National Broadband Network (NBN) reaches 95% of population in June 2012, many of the high-end customers could switch to lower-margin fibre plans. Meanwhile, in the corporate space, StarHub & M1 concede that NBN progress is quite slow due to the lack of control over service provisioning.
Structural changes for pay TV in the longer term. Under Next Generation Interactive Multimedia, Applications and Services (NIMS) project, regulators want to support contents from various providers accessible on a common set top box. The project is likely to be awarded to one of the three telcos in 1H12F and would be based on IPTV platform in our view. StarHub may need to support IPTV platform in addition to HFC platform.
StarHub is trading above +1SD valuations. We prefer SingTel for its (i) cheap valuation of 12x forward PE versus 16x for StarHub and 13x for M1. Downgrade StarHub to HOLD as we trim FY12F/13F earnings by 3%. Maintain HOLD on M1 as consensus FY12F earnings are 7% above ours. As mobile ARPU has not increased at all, fair value accounting for handsets may lead to disappointment in 2012F.