Category: StarHub
TELCOs – OCBC
Downgrade to NEUTRAL
- All largely in line
- Outlook still muted
- Downgrade to NEUTRAL
Results were mostly in line
All three telcos reported 1QCY13 results that came in within our expectations. M1’s core earnings met 27% of our full-year forecast; SingTel met 27%; and StarHub met 25%. StarHub declared a quarterly dividend of S$0.05/share as guided, while SingTel declared a final dividend of S$0.10 (bringing its total dividend for FY13 to S$0.168).
Review of Singapore mobile operations
Core post-paid mobile subscribers grew by 1.2% QoQ to 4.3m at end-Mar, led by SingTel (+1.4%), M1 (+1.1%) and StarHub (+0.8%). While monthly ARPUs were fairly stable, the three telcos expect to see some uplifts this year, aided by the new tiered pricing plans with less generous data bundles; they also expect data usage to trend higher as more users migrate to the faster 4G networks.
Outlook still quite muted this year
While the exception of M1, which expects to see a moderate earnings growth this year and pay out at least 80% of earnings as dividends, both SingTel and StarHub are more muted in their outlook. SingTel expects stable group revenue for FY14 while overall EBITDA should show low single-digit growth. It did raise its dividend payout ratio to 60-75% of core earnings. On the other hand, StarHub has pared its revenue guidance down to low single-digit growth from singledigit growth and kept its EBITDA margin at 31%. It also kept its dividend at S$0.20/share, or S$0.05/quarter.
Downgrade to NEUTRAL – yields are not attractive
In the search for yield, telco stocks have done very well, rising some 14-26% YTD. However, we note that the share prices have run up too much, too quickly, and this has driven yields down to below 5%. In addition, a more “risk-on” approach could see investors switching out of defensive plays. As such, we downgrade our rating on the sector to NEUTRAL from Overweight.
TELCOs – OCBC
Downgrade to NEUTRAL
- All largely in line
- Outlook still muted
- Downgrade to NEUTRAL
Results were mostly in line
All three telcos reported 1QCY13 results that came in within our expectations. M1’s core earnings met 27% of our full-year forecast; SingTel met 27%; and StarHub met 25%. StarHub declared a quarterly dividend of S$0.05/share as guided, while SingTel declared a final dividend of S$0.10 (bringing its total dividend for FY13 to S$0.168).
Review of Singapore mobile operations
Core post-paid mobile subscribers grew by 1.2% QoQ to 4.3m at end-Mar, led by SingTel (+1.4%), M1 (+1.1%) and StarHub (+0.8%). While monthly ARPUs were fairly stable, the three telcos expect to see some uplifts this year, aided by the new tiered pricing plans with less generous data bundles; they also expect data usage to trend higher as more users migrate to the faster 4G networks.
Outlook still quite muted this year
While the exception of M1, which expects to see a moderate earnings growth this year and pay out at least 80% of earnings as dividends, both SingTel and StarHub are more muted in their outlook. SingTel expects stable group revenue for FY14 while overall EBITDA should show low single-digit growth. It did raise its dividend payout ratio to 60-75% of core earnings. On the other hand, StarHub has pared its revenue guidance down to low single-digit growth from singledigit growth and kept its EBITDA margin at 31%. It also kept its dividend at S$0.20/share, or S$0.05/quarter.
Downgrade to NEUTRAL – yields are not attractive
In the search for yield, telco stocks have done very well, rising some 14-26% YTD. However, we note that the share prices have run up too much, too quickly, and this has driven yields down to below 5%. In addition, a more “risk-on” approach could see investors switching out of defensive plays. As such, we downgrade our rating on the sector to NEUTRAL from Overweight.
Starhub – Lim & Tan
- Starhub’s first quarter profits of S$91.2 million was up 3% y-o-y, in line with market expectations.
- Its broadband business contributed positively, with revenue growing 2% y-o-y, mainly attributable to a larger subscriber base and better plan mix.
- But this was partially offset by the decline in mobile revenue (-2% y-o-y) as a result of lower post-paid revenue from inter-connect operators and roaming services. Its Pay TV (-1% yo-y) also saw a small decline in revenue as a result of lower advertising revenue.
- The telecommunication company posted EBITDA margins of 33.3% in 1Q ’13, up from 32.2% in 1Q ’12 due to lower operating expenses from reduced cost of equipment sold and traffic expenses.
- For 1Q ’13, a cash dividend of 5 cents per share was declared. This translates into an annualized yield of 4.3%.
- Going forward, Starhub revised down its guidance for the Group’s operating revenue to grow in the lowsingle digit range y-o-y, with Group EBITDA margin expected to be about 31%. Likewise, its full year dividend guidance was maintained at 20 cents per share.
TELCOs – OSK DMG
SingTel Asked To Cross-Carry BPL Content
Singapore’s Media Development Authority (MDA) has directed SingTel to cross-carry the Barclays Premier League (BPL) for the 2013-2016 season starting in August. We are surprised by the directive but view it as favorable for StarHub as it would help to mitigate pay-TV churn. StarHub subscribers would now have access to the iconic content without a second set-top box. The decision is, however, negative for SingTel as it has to share content as well as bear the associated cross carriage costs despite having signed for the BPL on non-exclusive terms. We are keeping our NEUTRAL ratings on both companies given the recent strong share price re-rating for the sector. StarHub remains our preferred exposure to Singapore telecoms.
Getting a fair play. MDA’s directive was in response to the complaint filed by StarHub in February on its inability to negotiate for separate rights to the BPL. Media reports have said that SingTel had built in ‘restrictive conditions’ after inking the non-exclusive agreement with the Football Association Premier League (FAPL). This was said to have prevented the FAPL from commencing negotiations with other parties for an extended period of time.
Positive for StarHub. StarHub welcomes the development and sees pay-TV subscribers as the ultimate beneficiaries. We gather from management that it had capitalized on a provision within the cross carriage guidelines which stipulate that non-exclusive content can be shared if the agreement signed by another provider contained certain clauses which prevent or restrict, or are likely to prevent or restrict, the same content from being acquired or otherwise obtained for transmission on selected pay-TV platforms in Singapore.
SingTel to file an appeal. SingTel said it is “gravely disappointed” with MDA’s decision as it would ”disadvantage” both consumers and the industry. The company would appeal the decision and seek legal recourse, if necessary. Management believes the directive will discourage pay-TV operators from acting swiftly in the future to procure top quality content as this penalizes the operator and would see consumers losing out since it may no longer be economically viable for broadcasters to continue investing in quality programming for the benefit of consumers and businesses.
The red camp may play hardball. We believe SingTel could still make it difficult for StarHub’s subscribers to access the BPL with commercial terms of carriage that may be less favorable. SingTel is caught in a bind as it is mandated to charge other viewers the same rate it charges its own customers. The directive is negative for SingTel as it forces the company to share the content – although signed on a non-exclusive basis – and bear all costs associated with the carriage cost.
TELCOs – OSK DMG
SingTel Asked To Cross-Carry BPL Content
Singapore’s Media Development Authority (MDA) has directed SingTel to cross-carry the Barclays Premier League (BPL) for the 2013-2016 season starting in August. We are surprised by the directive but view it as favorable for StarHub as it would help to mitigate pay-TV churn. StarHub subscribers would now have access to the iconic content without a second set-top box. The decision is, however, negative for SingTel as it has to share content as well as bear the associated cross carriage costs despite having signed for the BPL on non-exclusive terms. We are keeping our NEUTRAL ratings on both companies given the recent strong share price re-rating for the sector. StarHub remains our preferred exposure to Singapore telecoms.
Getting a fair play. MDA’s directive was in response to the complaint filed by StarHub in February on its inability to negotiate for separate rights to the BPL. Media reports have said that SingTel had built in ‘restrictive conditions’ after inking the non-exclusive agreement with the Football Association Premier League (FAPL). This was said to have prevented the FAPL from commencing negotiations with other parties for an extended period of time.
Positive for StarHub. StarHub welcomes the development and sees pay-TV subscribers as the ultimate beneficiaries. We gather from management that it had capitalized on a provision within the cross carriage guidelines which stipulate that non-exclusive content can be shared if the agreement signed by another provider contained certain clauses which prevent or restrict, or are likely to prevent or restrict, the same content from being acquired or otherwise obtained for transmission on selected pay-TV platforms in Singapore.
SingTel to file an appeal. SingTel said it is “gravely disappointed” with MDA’s decision as it would ”disadvantage” both consumers and the industry. The company would appeal the decision and seek legal recourse, if necessary. Management believes the directive will discourage pay-TV operators from acting swiftly in the future to procure top quality content as this penalizes the operator and would see consumers losing out since it may no longer be economically viable for broadcasters to continue investing in quality programming for the benefit of consumers and businesses.
The red camp may play hardball. We believe SingTel could still make it difficult for StarHub’s subscribers to access the BPL with commercial terms of carriage that may be less favorable. SingTel is caught in a bind as it is mandated to charge other viewers the same rate it charges its own customers. The directive is negative for SingTel as it forces the company to share the content – although signed on a non-exclusive basis – and bear all costs associated with the carriage cost.