Starhub

Starhub: Reported 2Q12 net profit of $86.6m for 2Q12 (+11.0% yoy), slightly above expectations. EBITDA margin was 32.0% for 2Q12, 1.6ppt higher yoy but 0.2ppt lower qoq. Handset subsidies declined from $64.6m in 1Q12 to S$52.2m in 2Q12 with Android-based phones accounting for 60% of smartphones sold. On a sequential basis, higher cost of content due to Euro 2012 and higher content cost on renewal and new content was partially offset by higher other expenses due to provisions for property tax on network infrastructure and obsolescence of customer premises equipment (CPE). StarHub added only 2,000 post-paid mobile subscribers in 2Q12. It lost 29,000 pre-paid mobile subscribers due to expired pre-paid cards acquired during promotions. Post-paid ARPU increased S$1 qoq to S$75 due to take-up for SmartSurf plans with data bundle. Pre-paid ARPU decreased by S$1 qoq to S$18 due to lower usage of voice and SMS. Mobile revenue increased by only 1.2% yoy. StarHub lost 1,000 residential broadband subscribers, primarily those on low-speed plans. It maintains leadership for services above 50Mbps. It competes based on quality of bandwidth supported by its submarine cables and its hubbing strategy. Contribution from data & internet grew 3.7% qoq to S$72.9m due to take-up for Next Generation Nationwide Broadband Network (NGNBN)- based services. Going forward, mgt maintains guidance of low-singledigit growth in service revenue and EBITDA margin of about 30% for 2012. Capex should be about 11% of service revenue. Management intends to reorganise its distribution channel and step up marketing to drive usage of pre-paid services. Ratings as follow: CIMB Maintains OutPerform with $3.90 TP UOB Kay Hian maintains Hold with $3.60TP