Starhub

Starhub: 2Q13 results slightly above expectations. Net profit of $100.6m (+16% y/y) was lifted by margin improvement, and further boosted by a doubling of government-subsidised NGNBN adoption grants. Operating revenue was flat at $586.8m, due to fewer handsets sold, but also reflecting weaknesses in pay TV and broadband. Specifically, pay TV revenues declined 8% yoy on sustained subscriber loss (2Q13: 2,000, vs 4,000-5,000 loss in the past few quarters) and a 4% reduction in ARPU (due to one-off impact of UEFA Euro, which boosted 2Q12). Broadband revenues inched down 1% yoy (first decline since 2010) on competition-driven price discounts. On a positive note, mobile service revenues expanded 3% yoy on re-accelerated data revenue growth (+11% yoy). This was attributed to increased take-up of tiered pricing, which caused post-paid mobile ARPU to expand 6% QoQ (+1% YoY) – mirroring a similar trend reported by M1 last month. Noteable was the EBITDA margin (on service revenues) expansion to 34.1% (from 2Q12’s 32%), lifting EBITDA by 7% yoy to $192m, driven by reductions in traffic expenses (lower roaming and settlement rates) and other expenses. Mgt maintained its conservative 31% FY13 margin guidance, citing potential handset launches in 2H13 and sustained competition in home services. The group declared an interim dividend of 5cts, unchg yoy. Mgt also kept its DPU guidance at $0.20, which translates to 4.7% yield. Maybank KE maintains Hold with TP $4.22. Credit Suisse maintains Neutral with TP $4.40. Deutsche maintains Hold with TP $3.83. Nomura upgrades to Neutral from reduce, raises TP to $4.05 from $3.30.