What is the news?

StarHub  reported  a  1.0%  y-y  decrease  in  Net  Income  at $95.3.  Revenue decline was due to lower equipment sales as lesser quantities of handsets were sold. Service revenue was stable with increase in mobile and fixed network service revenue  but  offset by  lower revenue from the Pay TV and broadband segments.  Interim dividend of 5 cents per share was  declared.  StarHub  revised  guidance  from  low  single digit  revenue  growth  to  lower  revenue  than  2012  and EBITDA margin on service revenue from 31% to 32%.

How do we view this?

Increase in Mobile and Fixed Network service was mitigated by lower Pay TV and broadband revenue, leading to the flat y-y  growth  of  Service  revenue.  Price  competition  remains intense  in  the  broadband  space.  Lower  Pay  TV  revenue was  due  to  lower  subscription  and  advertising  revenue. However,  Pay  TV  customers  had  added  1.9K  for  the quarter,  reversing  the  declining  trend  in  subscriber  base. Despite lower revenue guided, we expect net profit for FY13 to be higher y-y on higher EBITDA margin. Dividend yield of 4.6%  remains  attractive and we continue to be positive on data monetising.

Investment Actions?

We adjust our forecast to reflect  3Q13 results and  maintain “Accumulate” rating with revised TP of $4.52, 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 - 8 Nov 2013