• FY14 figures within 2% of forecast
• Guides for very modest revenue growth
• New FV of S$4.17

FY14 results within forecast

StarHub Ltd reported a slightly better-thanexpected set of 4Q14 results last night, which saw revenue climbing 5.1% YoY and 9.4% QoQ to S$592.0m, driven by the still-strong demand for the new Apple iPhone 6 and 6+. Aided by a firmer-than-expected service EBITDA margin of 33.8% in 4Q14 (versus its FY14 guidance of 32%), net profit jumped 10.1% to S$94.2m. StarHub declared a quarterly dividend of S$0.05/share as guided. For the full-year, revenue grew 0.7% to S$2387.2m, or about 1.1% ahead of our forecast, while net profit slipped 9.1% to S$370.5m, and was just 1.7% above our estimate.

Broadband ARPUs still slipping

As before, StarHub continued to see intense competition in its Broadband business, where revenue tumbled another 15.3% YoY in 4Q14 (albeit not as bad as the 17.4% decline in 3Q14). Although it managed to add 8k new customers in the quarter, monthly ARPU fell further to S$34 (lowest in history), as more took up lower price plans. Fortunately, mobile business saw modest improvement (revenue +3.2%), aided by a seasonal improvement in ARPU to S$71/month from S$69 in 3Q14. Pay TV was again stable, with revenue flat YoY, although ARPU recovered to S$52/month from S$51 in the previous two quarters.

FY15 guidance has cautious feel

Going forward, StarHub expects FY15 service revenue to grow in the low single-digit range, driven mainly by its enterprise fixed network and mobile services. But it has kept its EBITDA margin guidance at 32% of service revenue, likely still wary about the continued price competition in the broadband space. StarHub expects to spend around 13% of total revenue as capex (versus 13.5% in FY14). It has also kept its annual dividend at S$0.20/share, or S$0.05 per quarter.

Maintain HOLD with new S$4.17 fair value

We have bumped up our FY15 forecasts by 1.6-3.7% to account for the resilient EBITDA margin outlook. While capex spending is slightly higher than expected, we expect the spending to go down from FY16 onwards; this bumps our DCFbased fair value up from S$3.81 to S$4.17. Maintain HOLD.

Source: OCBC Research - 26 Feb 2015