StarHub reported an 8% year-on-year rise in net profit for FY2024, reaching $161.7 million for the year ended Dec 31, 2024. It plans to pay a final dividend of 3.2 cents per share, bringing its total FY2024 payout to 6.2 cents.
Analysts had mixed reactions to StarHub ’s results.
CGS International downgraded their call on StarHub from “buy” to “hold”, lowering their target price to $1.30 from $1.40 previously, due to its “uncertain FY2025 earnings outlook”.
“We dial back our earning per share recovery expectations on tough mobile competition weighing on ARPU growth, slower realisation of Dare+ benefits, higher depreciation and amortisation (D&A) expenses from commencement of 700 MHz spectrum, and higher interest costs from refinancing some fixed rate debt,” note analysts Kenneth Tan and Lim Siew Key.
Hussaini Saifee of Maybank Securities has maintained his “hold” call but with a target price of $1.25, down from the previous $1.30.
He notes that despite the y-o-y increase in StarHub’s FY2024 net profit, it was 4% below Maybank’s and street estimates. The intense competition in the mobile space offsets the gains in StarHub’s enterprise (including cybersecurity) services.
“While industry consolidation remains a potential, we think the potential benefits will be limited owing to the presence of sub-scale but better-geared No.4 operator Simba.
"Dividend policy has been maintained at a minimum of 6 cents and with a stable ebitda outlook and spectrum payments due (leading to higher D&A costs), we see limited potential for StarHub to meaningfully increase the dividend from FY2024’s SGD6.2 cents per share," he adds.
UOB Kay Hian's Chong Lee Len and Llelleythan Tan Yi Rong have also downgraded their call from "buy" to "hold". They acknowledge the progress made by StarHub's enterprise businesses, and that it offers a "decent" yield of 5.5% but is of the view that it is now "fairly valued". From $1.41, their new target price is now $1.26.
Meanwhile, DBS Research Group maintained its “buy” call but with a lower target price of $1.46, from $1.54 previously.
“We project an 11% earnings CAGR over FY2025 and FY2027, and a yield of ~6% in FY2025. Furthermore, its share buyback plan provides downside protection for the stock,” wrote analyst Sachin Mittal in a note.
He also foresees Ensign, StarHub’s cybersecurity business, fetching a valuation of between 24 cents to 40 cents per share, based on his estimated FY2025 revenue.
“Ensign is a profitable business and has the potential to grow at a CAGR of 20% over 2025 to 2027. We expect Ensign to go public by FY2025 as it achieved operating profit breakeven in FY2023,” he says.
He continues: “We estimate Ensign alone to be worth $0.75-1.2 billion. StarHub can claim $417-694 million for its 55.73% stake, equating to 19%-32% of StarHub’s market cap of $2.2 billion.”
