Starhub

Starhub: 3Q13 net profit was 1% y/y in tandem with a 1.2% decrease in revenue at $578.8m, reflecting sustained weaknesses in pay-TV and broadband. Pay TV revenues declined 4% y/y, despite a slight pick up in subscriber gains, impacted by competition and lower ad revenues. Pay-TV ARPU decline of 2% y/y reflected the one-off impact of UEFA Euro, which boosted 3Q12. However, MBKE is optimistic on Starhub’s ability to cross-carry BPL, as it added 1000 pay tv customers in the quarter. Broadband revenues fell 5% y/y as ARPU decline accelerated to 4% y/y. Mobile service revenues rose 2% y/y as post-paid revenue gains offset decline in pre-paid revenues. Fixed network service revenues rose 3% y/y, and MBKE highlights how this has reached 16% of revenue, highlighting management’s focus on the enterprise business is working. Furthermore, this business has highest margin after mobile. Equipment sales dropped 26% y/y. Credit Suisse maintains optimism on mobile/fixed network services but expects pressure in residential broadband at least near term, while also maintaining the view that Starhub will benefit from the better monetisation in the mobile sector. However CS prefers M1 from higher exposure to domestic mobile growth. Daiwa feels that there’s a widening disconnect between share price performance and operational outlook, and is cutting to Underperform from Hold. Quarterly DPS of 5¢ maintained. Latest broker ratings as follows: MBKE maintains Buy with TP $5.13 Deutsche maintains Hold with TP $3.83 CS maintains Neutral with TP $4.40 Daiwa downgrades to U/PF form Hold with TP $3.92 (from $4.06) OCBC Maintains sell with TP: $3.82