What is the news?

StarHub reported a 15.9% y-y increase in Net Income at $100.6m, attributed to higher adoption grant income for NGNBN services and lower operating expense. Revenue decline was due to lower Pay TV service revenue, as 2Q- 2012 revenue was boosted by revenue from the UEFA EURO event. StarHub maintained guidance of low single digit revenue growth and EBITDA margin on service revenue at 31%.

How do we view this?

Despite lower Pay TV revenue, 2Q13’s service revenue was higher by 0.3% y-y, contributed by higher mobile revenue. We continue to be optimistic on higher pick up in revenue from data monetisation while current dividend yield of 4.7% remains attractive under current market conditions.

With SingTel’s appeal against Media Development Authority (MDA)’s direction rejected, StarHub will now be able to cross-carry the BPL live matches for the 2013/2014 season. However, we do not foresee an immediate effect of subscribers migrating to StarHub’s cable platform, despite the $300 rebate offered by StarHub. This is due to the steep pricing for stand-alone subscriptions at $59.90/mth. Many existing BPL subscribers on SingTel mioTV may still be under contract.

Investment Actions?

We adjust our forecast to reflect 2Q13 results and maintain “Accumulate” rating with revised TP of $4.37, based on our DCF model. We continue to see growth in StarHub’s service revenue, on higher pick up in revenue from mobile and fixed network service.

Source: PhillipCapital Research - 7 Aug 2013