• StarHub’s net profit of S$62.7m (-22% y-o-y, -0.2% q-o-q) was inline our expectations of S$60-65m. 4Scts DPS was line.
• Management hinted at cost reduction initiatives and review of dividend policy for FY19F; we project sharp cut in FY19F dividends.
• We value StarHub at 12-month forward EV/EBITDA of 5.6x, ~20% discount to 7x regional average given weak EBITDA prospects. Maintain HOLD with Target Price of S$1.42.

What’s New

Enterprise segment to the rescue, again.

StarHub’s service revenue of S$466.8m (+0.7% y-o-y, +3.5% q-o-q) was marginally above our expectations of S$455m. The positive surprise was largely due to healthy growth of the enterprise business. A 22% y-o-y expansion in revenue from the enterprise fixed services segment, largely with the consolidation of ASTL and D’Crypt driving up revenues from managed services, helped offset losses in mobile and Pay TV segments, resulting in a marginal y-o-y expansion in service revenue.

StarHub’s mobile service revenue of S$ 213.5m (-6.6% y-o-y, +4.1% q-o-q) continued to remain under pressure with the growing uptake of SIM-only plans and lower revenue from subscribers exceeding their data bundles with the availability of unlimited data over weekends and cheaper data add-ons.

StarHub’s pay TV revenue contracted 4.8% y-o-y with the loss of ~11k subscribers despite the football World Cup 2018 occurring during the quarter.

StarHub’s revenue from equipment sales expanded 27% y-o-y as StarHub pushed for more premium handset sales and smart home equipment, bringing total revenue to S$597m (+5.4% y-o-y, +6.5% q-o-q).

Source: DBS Research - 08 Aug 2018