Starhub

Starhub: DBSV upgrades to Buy from hold, raises TP to $4.00 from $3.67, based on three keys – costs, grants and dividends. i) Notes the Conexus alliance and Vodafone partnership (Starhub became an exclusive partner to Vodafone in Spore in Jan ’12 after Vodafone and M1 ended their 7-yr partnership) are helping to reduce traffic costs. ii) Starhub has received $100m of rollout grants over the past 2 yrs. The co amortizes this over 5 yrs and recognized $20m under “Other Income” in FY11. DBSV expects Starhub to receive additional adoption grants of up to $150m linked to migration of consumers to 100 Mbps connections. iii) Starhub’s projected 6% yield is second highest while yield spread at 4.6% is highest amongst DBSV’s telcos under coverage. The stock is +1.4% at $3.74.