Towards Financial Freedom
STH - Ringing Up a Strong 1H2013
STH's 1HFY13 results were in line, with the following key takeaways: i) the higher take-up of tiered data plans raised q-o-q postpaid ARPU, and (ii) the EBITDA margin improved from a lower volume of handsets sold. We are still NEUTRAL (FV: SGD4.18) given the stock's rich valuation, although it is well-supported by a 5% sustainable dividend yield. We prefer M1 (NEUTRAL, FV: SGD3.25) for exposure to the sector.
- Strong 1H, but expect weaker 2H. Although StarHub (STH)'s 1HFY13 core earnings made up a strong 56% and 53% of our and consensus estimates respectively, we consider the numbers to be in line as we expect a weaker 2H from higher handset subsidies and increased competition. Overall service revenue (excluding handset sales) were flat y-o-y in 1HFY13 (+3% q-o-q), reflecting continued pressure on pay-TV revenue (-5% y-o-y). An expected five-cent DPS was declared.
- Higher postpaid ARPU from tiered plans. 362k STH subscribers had moved to its tiered long term evolution (LTE) data plans as at 2QFY13, a 33% rise q-o-q. This fuelled the 6% q-o-q rise in postpaid average revenue per user (ARPU) and a 5% sequential increase in postpaid revenue. We expect the take-up of tiered plans to keep growing on the back of the expanded LTE footprint and STH to consider raising price points by 4Q13, allowing for better data monetisation.
Source: OSK
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