Results Beat; Maintain HOLD on Upfront Uncertainty

• StarHub (SGX:CC3)'s 2021 earnings beat MIBG expectations, with PATMI above our forecast but in line with consensus. The DARE+ strategy points to early signs of rising ARPUs across all segments and a strong 5G adoption rate is positive. But higher upfront capex in executing the new strategy and lingering uncertainty on regional re-opening are major offsetting factors.

Broadband and Enterprise on the Move

• StarHub's Broadband Service revenue increased S$18.3m (10.4% y-o-y) mainly due to higher ARPUs from continued reductions in subscription discounts and increased take up of higher-tier 2 Gbps plans. ARPU of S$32 for the full year was S$3 higher (12.6% y-o-y). Average monthly churn rate was at 0.7% in 4Q2021 and 0.8% for the full year.
• As businesses prepare for stronger demand post pandemic recovery, StarHub's Enterprise Business revenue ticked higher (9.4% y-o-y) mainly due to higher contributions from Cybersecurity Services and the consolidation of Strateq under Regional ICT Services. This was partially offset by lower revenues generated from Data & Internet (-7.7% y-o-y), Managed Services (-3.4% y-o-y) and Voice Services (-16.4% y-o-y) due to fewer project completion on the back of global chip supply shortage.

Mobile and PayTV Lag Despite Higher Subscribers

• StarHub's FY21 Mobile Service revenue at S$531m (-8.5% y-o-y), mainly due to lower postpaid and prepaid revenues advertising by Enterprise customers. Total Entertainment subscribers stood at 444,000 after Q4 net addition of 36,000 subscribers attributed to higher OTT take-up.

Anticipating Higher Revenues

• StarHub has guided higher 2022E and 2023E service revenue on new DARE+ initiatives, rolling out 5G with 8.8% upside, maintain HOLD.

• Our preferred picks in the telco sector are SingTel (SGX:Z74) and NetLink Trust (SGX:CJLU).
• We transfer coverage on StarHub to Kelvin Tan.

Source: Maybank Investment Research - 14 Feb 2022