In line. Starhub's 1HFY12 revenue of SGD1.18bn (+4.8% y-o-y/flat q-o-q) and net profit of SGD175.2m (+19.1% y-o-y/-1.8% q-o-q) made up 49% and 52% of our in line with consensus estimates. We consider the results as broadly within expectations due to the anticipated launch of the iPhone 5 which Starhub believes could exert a fresh round of pressure on EBITDA margin in 4Q2012. The company has retained its guidance of single digit revenue growth for FY12 and EBITDA margin of 30% which, when compared to the 32% recorded in 1HFY12, imply a weaker EBITDA margin of 28% for 2HFY12.

Prepaid revenue slips. The group posted y-o-y and sequential revenue growth of 4% for 1HFY12 and 2Q12 respectively, mainly driven by stronger pay-tv revenue which saw a one-month contribution from the Euro 2012 broadcast in June. Despite 1QFY12 being seasonally weak, Starhub turned in flat mobile revenue as prepaid revenue dipped 2% q-o-q from higher churns resulting from the expiration of certain promotional offers.

2Q12 content spike. Management declined to comment if the Euro 2012 broadcast (first content procured exclusively under cross carriage) was profitable for its pay-TV business. We suspect it made a loss as the incremental cost to provide the content is significantly more than the SGD2/mth pay-TV ARPU enhancement from the broadcast in 2QFY12, excluding revenues derived from sponsorships related to the event. The group's cost of services (where content cost is booked) rose 16% q-o-q (+27% y-o-y) in 2Q12 which was also bumped up by higher renewals associated with certain undisclosed nonexclusive content.

Joint bid for BPL? We expect Starhub to bid rationally for the 2013-2016 season of the Barclays Premier League(BPL) based on its experience in 2009. Starhub will still be able to carry the BPL in the event it loses the bid to Singtel. We think it may enter into a joint bid with Singtel to reduce the overall financial impact.

Nothing new on capital management. At the results call, management reiterated the need to maintain a sufficient cash buffer for capex (front-loaded LTE capex likely to contribute to higher capex for 2HFY12) despite its relatively un-geared balance sheet.

Source : OSK