Category: StarHub
StarHub – BT
StarHub Q3 earnings fall 0.2% to $81.3m
Telco suffers first quarterly profit decline since its listing 3 years ago
STARHUB has posted lower net profits of $81.3 million for the third quarter ended Sept 30 – its first quarterly decline since the telco’s listing in October 2004 – amid intense competition and higher content costs for its football channel.
Singapore’s second-largest listed telco, StarHub said net profit fell 0.2 per cent to $81.3 million while earnings per share rose to 4.78 cents from 3.97 cents a year ago.
Revenue grew 11.4 per cent to $513.1 million, from $460.6 million a year ago but cost of sales rose a faster 29 per cent per cent, driving total operating expenses 13.4 per cent higher to $405.4 million.
StarHub chief executive Terry Klontz said the quarter’s higher cost was due to its cable TV business amortisation of costs for the new season of Barclay Premier League programming rights.
But the price increase for the sports package does not kick in until this quarter, and even then for only two months, he said.
The full impact of the higher prices will be felt next year. For the nine months, net profit rose 6.2 per cent to $232 million.
All four businesses reported growth in revenues.
Although StarHub’s Q3 mobile phone business grew its revenue 13.9 per cent to $266.2 million year on year and continues to be the firm’s largest earner, market share has slipped.
StarHub managed to increase its number of mobile phone subscribers by 50,000 to 1.68 million during the quarter but market share slipped to 31.8 per cent from its peak 33.2 per cent a year ago.
Smaller rival Mobile-One, which posted third-quarter results last month, added 58,000 new customers to bring its total customer base to 1.467 million.
As for Singapore Telecommunications, which will report second-quarter results next week, it said in August during its first-quarter presentation that total number of mobile subscribers rose to 1.92 million as it added 124,000 new customers, giving the company a 39 per cent market share, up one percentage point from a year ago.
StarHub spokeswoman Jeannie Ong said the firm does not have a market share target. ‘We are focused on revenue,’ said Ms Ong.
Broadband registered 11.7 per cent Q3 growth to $62 million while Cable TV revenue was up 8.5 per cent to $85.8 million.
Fixed network business rose 3.9 per cent to $73.4 million.
StarHub also revised its 2007 revenue growth guidance upwards to about 11 per cent, from high single digit.
It expects margin on blended earnings before interest, tax, depreciation and amortisation (Ebitda) to remain around 34 per cent.
Full-year cash capital expenditure, as a ratio of operating revenue, is expected to be about 12 per cent, against earlier expectations of not more than 14 per cent.
The company declared a dividend of four cents and confirmed that it will pay a minimum annual cash dividend for the full financial year 2007 of 15.5 cents per ordinary share.
This means a dividend payment of four cents per quarter for the remainder of the year.
TELCOs – BT
Buy M1, SingTel, StarHub for their safe-haven status: Citi
All 3 outperformed the stock market in last 3 corrections
BUY the three listed telcos for their safe-haven status, given that markets are at all time highs, said Citi in a report this week.
It noted that the telcos outperformed the stock market in the last three corrections earlier this year, in 2006 and 2004, a point Citi had highlighted last month.
‘This track record should encourage ownership of all three Singapore telecom stocks, given that the markets are at all time highs,’ it said.
As domestic consumption stories, the telcos are largely insulated from the risk of a global economic slowdown, Citi had said in a September report on Asian telcos.
‘It’s all about relative outperformance though. No one single telco has delivered a positive return over the last three corrections (StarHub comes close),’ it said.
In the 2004 market correction, M1 outperformed the Straits Times Index (STI) 5.6 per cent while SingTel was 0.2 per cent higher.
StarHub was only listed in October 2004.
During last year’s correction, M1 outperformed 7.6 per cent, SingTel 0.4 per cent and StarHub 13.3 per cent.
During this year’s correction, the outperformance of M1, SingTel and StarHub was 10.9 per cent, 0.3 per cent and 5.9 per cent respectively.
In the latest report, Citi said the Singapore telcos are benefiting from the immigration-driven consumption growth and robust economic activity.
Yesterday, the government said preliminary third-quarter growth was 9.4 per cent. Economists are expecting full-year growth to exceed the official 7-8 per cent forecast.
Last month, government data showed that Singapore’s total population rose 4.4 per cent in 2007 to 4.7 million, boosted by foreigners.
The non-resident population grew about 14.9 per cent in 2007 to cross one million. Non-residents accounted for about 130,000 or 66 per cent of the total population increase.
The resident population grew 1.8 per cent in 2007 and in absolute terms, it was 66,600 from a year ago.
Citi’s economist Chua Hak Bin said: ‘The proportion gives a sense of distribution of current job growth, with about two-thirds of jobs going to non-residents.’
Job growth has been strong with total employment at 2.61 million at end-June 2007, up from 2.5 million at end-2006 and 2.32 million at end-2005.
Job growth was about 113,800 in the first half of this year. Manpower Minister Ng Eng Hen said a record 200,000 jobs at least will be reached this year.
The telcos focus much of their marketing, particularly pre-paid mobile services, on the foreign worker segment.
Citi has revised upwards its price target for SingTel to $4.40 from $3.90.
It likes SingTel for three reasons – its stakes in regional telcos, especially India’s Bharti, solid domestic earnings momentum and capital management efforts.
As for StarHub, the telco has the best exposure to Singapore’s vigorous growth, Citi said, also giving a new target price of $3.60 from $3.30.
M1 has been upgraded to ‘buy’ from ‘hold’. Citi said while M1 is structurally the weakest of the three operators, its good yield offsets lower growth prospect. Citi cites a 11 per cent prospective yield and noted that an interested buyer in Keppel has increased its holdings to 19.9 per cent versus 18.2 per cent in June.
StarHub – OCBC
Will there be a triple top?
– StarHub has been trading within a rising trend channel since Nov 06 but it seems to have paused over the last 2 months.
– StarHub appears to have formed a double top last week after it tested but failed to surpass its Jun 07 peak at S$3.24.
– The stock has since fallen back to sit just above the 50- and 100-day moving averages, as well as the lower band of the trend channel, suggesting downside from here looks limited.
– As the subsequent pullback was made on weak volume, coupled with the short-term stochastic indicator close to turning up inside the oversold region, we expect StarHub to rebound and retest the S$3.24 again.
– However, we do not expect the S$3.24 resistance to break due to the negative divergence that has formed on the MACD. Hence any rebound would be short-lived.
– Should the support level around the lower band of the trend channel fail to hold, StarHub could fall back to the 1st support level at S$2.75. Subsequent support set at S$2.54.
Note : In the original report by OCBC, we assume S$3.24 was wrongly stated as S$2.24 and we have corrected it accordingly for this post
TELCOs – CIMB
Growth surprises, capital management could be next
• 2QCY07 results marked the start of re-rating for Singapore telcos. Earnings for SingTel’s Singapore operations and M1 surprised on the upside while StarHub’s performance was within our expectations. The sector’s 9.5% yoy revenue growth, driven by double-digit increases in mobile (11.5% yoy) and Internet/data services (+14% yoy), was the quarter’s highlight.
• Topline drivers remain a robust domestic economy and immigration influx. A robust domestic economy has lifted mobile postpaid ARPU (+5.6% yoy) and penetration rates for household broadband (Jun 07: 71%, Jun 06: 56%). Meanwhile, an influx of immigrant labour on the back of Singapore’s transformation into a global city continued to drive mobile-subscription growth (+11.5% yoy), despite high penetration rates of 111%.
• Potential yield surprises. Consensus is expecting an average CY08 yield of 5.6%. We are going for 8.0%. We believe that topline-led cash-flow growth will set the stage for upside yield surprises over the next two years, particularly for StarHub and M1.
• Risks receding. The risk of cost pressure is declining on the back of healthy topline growth. The three telcos are indicating greater comfort with next-generation broadband network (NBN) risks from a year ago, following dialogues with the regulatory body, IDA. We also believe the IDA’s final decisions will be balanced between introducing greater innovation through competition and limiting the risk of destructive competition for SingTel and StarHub.
• Upgrading sector to Overweight from Neutral; SingTel our top pick on 3-6-month view; StarHub our preferred pick on 6-12-month view. We raise our target prices for SingTel (Outperform), StarHub (Outperform) and M1 (Neutral) as we roll forward our valuation to CY08. Our ratings on the three stocks remain unchanged. SingTel’s target price goes up to S$4.54 (from S$4.27), StarHub’s to S$3.64 (from S$3.50) and M1’s to S$2.40, all based on DCF valuations. Singapore’s telco sector is benefiting from strong consumption growth on the back of an immigration boom and robust domestic economy. Strong cash flow-generation sets the backdrop for attractive sector yields of 8%. SingTel is our top pick for nearterm outperformance, as it is most likely to benefit from fund flows seeking a safe haven together with high growth in regional markets. StarHub is our preferred pick for the medium term. As the leading quadruple-offering operator, StarHub arguably offers the best exposure to Singapore’s immigration boom, with a 10% yield on strong free cash flow. M1 is a pure defensive stock with prospective yields of 9.5%.
StarHub – CIMB
Time to shine
• Best exposure to immigration influx and rising wages. Singapore’s population boom (+4.4%yoy) on immigration influx and wage growth (+8%yoy) helped drive Singapore’s mobile and broadband penetration rates to 113% (+210bps mom) and 75% (270bps mom) respectively in July. We reiterate our view that StarHub offers the best exposure to Singapore’s telco services consumption growth story.
• Rejuvenated cable TV could surprise. StarHub has introduced compelling new content, setting the stage for cable TV to surprise over the next few quarters.
• Re-rating around the corner. StarHub was de-rated by the market in 1H07 on unjustifiable concerns surrounding mioTV and pricing pressure on broadband. Operating results in 2H07 should dispel these concerns, triggering a re-rating.
• Consensus dividend yield estimate too conservative. We reiterate our view that consensus is due to upgrade its 5.6% CY08 yield expectations towards our expectation of 10% yield.
• Maintaining Outperform, upgrading target price to S$3.64 as we roll forward our DCF valuation (WACC: 6.9%, terminal growth: 1%) to CY08 basis. StarHub is our preferred Singapore telco pick over the next 12 months. Key catalysts include earnings delivery and dividend payouts that beat consensus expectations.