Starhub

Starhub: 4Q13 net profit came it at lower end of estimates, softened by 4.8% to $83.7m in line with a 6.2% shrinkage in topline at $613.7m, mainly due to a 45.1% decrease in sales of equipment to ~$50m. On the whole, service revenue remained flat y/y at $563.8m. Pay TV revenue advanced 2.1% to $99.7m, while Fixed Network services rose 2.58% to $97.3m. Mobile services revenue was up 0.8% to $310.5m. The increases were offset by lower broadband revenue. PayTV and Post-paid ARPUs remained stable at $52 and $70 respectively, while broadband ARPU fell to $42 (3Q2012: $46). With management expecting low single-digit service revenue growth, and EBITDA margin on service revenue of 32%, many brokers think that Starhub’s near term prospects are unexciting at this point. That said, MKE still likes Starhub and cites catalysts as: 1) 32% EBITDA margin guidance too low – there is room for handset subsidies to fall further 2) NBN provisioning should continue to ease as gov’t moves to speed up NBN rollout. Final DPS of 5¢/share proposed. Management had also guided that FY14 dividend commitment will be unchanged at 20¢/share. Latest broker ratings as follows: Maybank KE: Maintains Buy, with TP slightly shaved to $4.98 Nomura: Maintains Neutral, with TP decreased to $4.23 (from $4.32) Starhub: Maintains Neutral, with TP unchanged at $4.40 Deutsche: Maintains Hold with TP $3.83 OCBC: Maintains Sell with TP of $3.81