Analysts are maintaining a neutral stance on StarHub, given its steady outlook amid headwinds in Singapore’s telecommunications sector.
Maybank Securities analyst Hussaini Saifee is maintaining his “hold” call on the telco with an unchanged target price of $1.17.
Despite intense competition in Singapore’s mobile and broadband markets, StarHub is gaining ground. It has grown its subscriber base across all three segments — premium (StarHub), digital (Giga) and value (Eight) — and widening its lead over rival M1 by six percentage points.
Enterprise services remain a bright spot, driven by strong growth in managed services and cybersecurity. Notable contract wins, including the JTC Punggol Digital District project, underscore StarHub’s execution strength and potential to replicate success in other markets.
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Cybersecurity unit Ensign continues to deliver double-digit revenue growth, underpinned by ongoing investment in R&D and talent acquisition. While this supports long-term scalability, it could limit margin expansion in the near term.
“Overall, enterprise momentum is expected to remain firm. However, the enterprise segment’s structurally lower margins versus consumer could weigh on group profitability amid continued softness in the consumer business,” writes Saifee in his July 7 note.
StarHub’s net leverage stands at 1.3 times, with about $600 million in cash, which management sees as supporting future mergers and acquisitions. However, cash levels are expected to decrease due to the payment for the 700MHz spectrum. Mobile capital expenditure may also increase as the rollout of a new spectrum begins.
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“Of the $50 million share buyback programme, $36 million remains available, which we view as providing downside support to the stock,” says Saifee.
Similarly, RHB Bank Singapore reiterates its “neutral” call with an unchanged target price of $1.14.
RHB cautions that the company’s target of delivering a steady-state incremental net profit after tax (NPAT) of $80 million by FY2027 under its Dare+ transformation plan is looking increasingly challenging to achieve.
In a July 8 note, RHB flags that stiff competition in the consumer market, lumpy costs associated with the decommissioning of legacy network assets and IT investments will weigh on earnings in the near term. In 1QFY2025, ebitda grew just 0.3% y-o-y.
In June, StarHub paid for a smaller 20MHz block of the 700MHz 5G spectrum, a move that reflects the cautious operating environment. RHB believes the tight market conditions and monetisation challenges have diluted the business case for the spectrum. Rival M1 also opted for a smaller share.
“The market may still view the smaller spectrum procured as a pre-emptive move ahead of market consolidation. Both StarHub and M1 have until June 30, 2026, to roll out 5G on the 700MHz spectrum,” says RHB. — Nurdianah Md Nur
Raffles Medical Group
Price target:
UOB Kay Hian ‘buy’ $1.18
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Higher costs but more growth ahead
Raffles Medical Group faces stiffer competition for manpower and the stronger Singapore dollar is not helping to attract more medical tourists while regional competitors step up their efforts. Yet, given further improvements in its operations in China, UOB Kay Hian analysts Llelleythan Tan Yi Rong and Heido Mo believe that there is further upside for this stock.
In their July 8 note, Tan and Mo note that to address the shortage of nurses, wages have been steadily rising. “We expect to see increased manpower costs on a h-o-h basis for 1HFY2025,” say the analysts.
Tan and Mo also warn that the stronger Singdollar versus the rupiah will weigh down on the growth of foreign patients, with more than half from Indonesia.
“An increasing number of Raffles Medical’s foreign patients have opted for cheaper alternative healthcare in neighbouring countries such as Malaysia and Thailand, specifically for non-critical healthcare,” suggest the analysts, who are expecting “muted” levels for 1HFY2025.
“Potential upside may come from implementing price increases in 2025 and realising cost efficiencies at Raffles Hospital Singapore,” they add.
Meanwhile, with a ramp-up in the number of patients, Raffles Medical’s operations in Chongqing and Shanghai are expected to contribute more, extending a 10.1% y-o-y growth in revenue in FY2024.
The UOB Kay Hian analysts are expecting “stable” earnings growth for the healthcare services segment, with revenue up 15% y-o-y in 1HFY2025, while operating profit will be up 16% y-o-y in the same period.
Hospital services, another reporting segment, will also see a 4% y-o-y increase in revenue, driven by price increases and a stable domestic patient load. However, Tan and Mo expect operating profit to grow by 54% y-o-y, thanks to better cost efficiencies, a ramp-up in the group’s Chinese operations and an increase in higher-margin domestic elective surgeries.
Meanwhile, Raffles Medical’s insurance arm is still expected to suffer a small operating loss of $3 million in 1HFY2025 and could remain in the red for the next one to two years.
In summary, Tan and Mo have maintained their “buy” call, with a higher target price of $1.18, up from $1.06 previously, as they have applied a higher P/E multiple of 31 times, up from 28 times previously.
“Despite the recent rise in share price performance, we still see potential upside at current price levels, underpinned by expected earnings growth and the recently announced share buyback.
“We remain bullish on Raffles Medical’s expansion in China/Vietnam, coupled with potential new acquisitions in the medium to long term,” say the analysts. — The Edge Singapore
Seatrium
Price target:
UOB Kay Hian ‘buy’ $2.96
Poised to capture more specialised orders
Adrian Loh of UOB Kay Hian is staying bullish on Seatrium, confident that the company’s ability to deliver projects on time and within budget, including, most recently, the US$2.3 billion ($2.94 billion) P-78 FPSO for key customer Petrobras.
“As the company works through its $21.3 billion order book in the near and medium term, its ability to deliver on time and on budget to underscore its execution capability and leadership in both offshore production and repairs will enable it to garner more orders for specialised building projects, in our view,” states Loh in his July 8 note, where he has kept his “buy” call and $2.96 target price.
Separately, on July 4, the company announced that it had won a contract estimated by Loh to be worth between US$250 million and US$350 million from Kinetics to convert a 67,000 dwt LNG carrier into an FSRU, or Floating Storage Regasification Unit. Seatrium is also working on two other FSRU conversion projects for Kinetics, with deliveries scheduled for 4Q2025 and 1Q2026.
For the upcoming 1HFY2025 earnings to be announced on July 31, Loh expects Seatrium to report a revenue of $4.1 billion, up 2% y-o-y, and earnings of $145 million, up 303% y-o-y. Loh assumes gross margins to expand to around 3.5% vs 2.7% in 2HFY2024.
Loh had earlier held “high hopes” that Seatrium’s Texas-based yard could help capture new orders, but he has since “moderated” such expectations.
“The US industrial landscape has a myriad of hurdles and many of them appear insurmountable in the near to medium term,” explains Loh, listing issues such as the lack of a skilled workforce to undertake complex commercial projects and prohibitive labour costs which start at US$70/hour compared to Asian yards, which are more than 50% cheaper at the very least. In addition, “haphazard” policies at the federal level, which change by the month, have been dissuading companies from long-term strategic planning, warns Loh.
As at end-1QFY2025, Seatrium’s net order book stood at $21.3 billion, an increase from the $20.7 billion as at end-1QFY2024, underpinning Seatrium’s multi-year revenue visibility up to 2031.
Loh has kept his target price at $2.96, which is based on 1.5 standard deviations above the book value. This valuation multiple is a five-year average, but in Loh’s view, it appears “reasonable” considering Seatriun’s strong competitive position globally and within the offshore marine industry as a specialist asset builder, its increasing revenue visibility till 2031 and the potential for more order wins in 2025.
In the near term, the key re-rating catalyst is the completion of the investigation by the Monetary Authority of Singapore and the Commercial Affairs Department, adds Loh. — The Edge Singapore
