• Upgrade to ADD with a revised target price of S$1.85. Multi-year share price decline now fairly accounts for competition risk, with potential upside surprise from cost cuts.
• We cut FY19F-20F DPS to a more sustainable S$0.10 p.a. Still decent 6.1% yield.
• StarHub will pursue cost optimisation in 2H18F. Our scenario analysis shows a sizeable fair value boost if cost cuts are better-than-expected.
• Enterprise Fixed business may surprise on the upside on bigger-than-expected government contract wins and/or earnings-accretive acquisitions.
• Key developments to watch:
  1. TPG’s service launch by year-end,
  2. TPG’s market traction by mid-2019 and
  3. more details on cost cuts during 3Q/4Q18 results call.

Source: CGS-CIMB Research - 14 Aug 2018