StarHub

StarHub: 4Q14 net profit rose 10.1% to $94.2m, EBITDA rose 10.2% to $192.4m.

Revenue increased 5.1% to $647.4m, primarily from iPhone 6 sales, as service revenue increased only 0.5% to $569.2m.

Service revenue increases in mobile ($320.5m, +2.6%) and fixed network services ($100.9m, +3.7%) was offset by decreases in broadband ($47.7m, -15.9%). Pay TV ($100.1m, +0.2%) was flat.

Zooming into trends, mobile ARPU increased $2 both q/q and y/y to $71, driven by new 4G tiered data plans and higher data usage from tiered users, while user base grew 5.4% y/y (+1.8% q/q). Embattled broadband saw ARPU fall $8 y/y (-$1q/q) to $34, while number of customers increased 4.8% (+1.7% q/q). Meanwhile, data and internet services drove fixed network services revenue.

EBITDA margin on service revenue was 33.8% (+2.9ppt), driven by a $9m write back of maintenance expenditure and savings from staff cost.
Management guided for a low-single digit growth revenue growth and 32% EBITDA margin on service revenue.

For broadband, management guides competition is now shifting to speed than price. As such, there could be room for broadband revenue growth, as their 1Gbps package is $49/month, above the current $34 ARPU. Momentum in gaining subscribers could also bode well.

Aside, management is also optimistic on mobile data monetization and enterprise businesses being growth drivers, though the latter remains more a medium term target.

Flat FY15 dividend guidance of 20¢ could cap share price appreciation.

StarHub is trading at 10.74x EV/EBITDA, against peers M1’s 11.9x and SingTel’s 15.1x. It is currently offering a 4.5% yield.

Latest broker ratings:
Morgan Stanley maintains Equal-Weight with TP of $4.20
JP Morgan maintains Neutral with TP increased to $4.30 from $4.10
UBS maintains Buy with TP of $4.95
Credit Suisse maintains Underperform with TP of $3.95
Deutsche maintains Hold with TP of $4.30