Starhub

Starhub’s 2Q15 results were in line, with net profit up 5% y/y to $99.1m on revenue of $589.5m (+2.3%).

Revenue was bolstered by a 42.6% rise in equipment sales to $35.2m due to higher re-contracts for new smartphones. However, service revenue of $96.7m (+0.5%) was muted by declines in its pay TV (-0.6%) and broadband (-3.9%) segments. EBITDA margin was relatively stable at 35.1%

Segmental highlights:
Mobile: Continued to have a huge impact on overall performance, contributing 52.7% to total revenue or $310.8m (+0.2%). The number of prepaid mobile users fell to 849,000 (-19.1%), while postpaid users saw a healthy bump to 1.3m (+5.6%). Postpaid and prepaid ARPU both ticked up $2 to $70 and $18 respectively, with postpaid ARPU growth driven by higher consumption of mobile data.

Pay TV: Revenue eased to $97.8m (-0.6%) primarily due to lower advertising revenue. Its customer base grew 1.9% to 545,000 while ARPU was flat at $52.

Broadband: The segment was the biggest dampener as price competition reduced subscription revenue from both re-contracting and new subscribers. Revenue slipped 3.9% to $49m despite 4.2% growth in the number of subscribers to 475,000 as ARPU sagged 10.8% to $33.

Fixed network: Revenue grew 5% to $96.7, making it the single largest growth contributor to service revenue as growth in data and internet service revenue (+7.1% to $83m) outpaced declines in voice services (-6.1% to $13.7m).

Going forward, management continues to see growth opportunities in its enterprise segment as there is increased adoption of its suite of managed services and connectivity solutions on its fixed network infrastructure. In particular, it sees SMEs as its next potential target to expand its NGNBN reach.

With the release of new smartphones, particularly the iPhone 6S in 2H15, it could see some margin compression on seasonal re-contracting expenses.

Interim DPS of $0.05 was maintained, implying a 5.1% yield.

StarHub currently trades at 9.9x EV/EBITDA and 18.1x forward P/E.

Latest broker’s ratings:
Maybank-KE maintains Buy with TP of $5.00
Deutsche maintains Hold with TP of $4.05
RHB maintains Neutral with TP of $4.00
OCBC upgrades to Buy from Hold but cuts TP to $3.96 from $4.17
HSBC upgrades to Hold from Reduce with TP of $3.70
UOBKH maintains Sell with TP but raises TP to $3.57 from $3.50