DBS analyst Sachin Mittal says StarHub’s 1QFY2026 normalised earnings of $5.9 million came in below consensus expectations of $10.6 million, while service revenue was 4% below consensus expectations of $466.1 million. The miss was “mainly due to ebitda decline alongside higher depreciation and amortisation and higher net finance costs”, he writes in his May 7 note.
Mittal maintains his “fully valued” call on StarHub with an unchanged target price of 94 cents.
Meanwhile, RHB has kept its “sell” call with a lowered target price of 87 cents, from $1 previously, implying a downside of 13.9%. “We expect the earnings malaise to continue with price competition having intensified in recent weeks, while strategic cost management initiatives will take time to yield results,” says the research house.
The pressure was most visible in StarHub’s consumer business. Mobile service revenue fell 10.9% y-o-y to $124 million, while broadband revenue dropped 8.7% y-o-y to $58.8 million. Entertainment revenue declined 9.1% y-o-y to $45.8 million. StarHub says mobile revenue was lower mainly due to softer roaming, value-added services, and SMS usage, while broadband revenue fell mainly due to lower subscription revenue.
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Both research houses flag competition as the main concern. DBS says StarHub highlighted that Singtel has been "overly aggressive" in both mobile and broadband. Similarly, RHB says management pointed to the incumbent undercutting prices across the board, with some price points falling below mobile virtual network operators and value brands.
That pressure is showing up in StarHub’s margins. Its service ebitda margin narrowed to 16.5% from 20.6% a year earlier, while RHB says higher staff and marketing costs added to the ebitda drag.
StarHub has maintained its FY2026 ebitda guidance at 75% to 80% of FY2025 levels, which Mittal notes is below consensus expectations of about 83%. The company is also targeting $70 million in savings through FY2028 under its Strategic Cost Pillars programme that includes legacy decommissioning, network optimisation, systems re-architecture and business simplification.
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However, Mittal expects the bulk of the savings to kick in only from FY2027 onwards, while RHB says the benefits are likely to be back-loaded to FY2028. RHB has cut its FY2026 and FY2027 core net profit forecasts by 10.7% and 8%, respectively, while raising its FY2028 forecast by 13%.
StarHub and Temasek agreed after the quarter ended to terminate an assigned rights arrangement relating to part of StarHub’s economic and equity interest in Ensign InfoSecurity for total cash proceeds of $121 million. StarHub expects to recognise a fair value gain of about $244 million, strengthening FY2026 NPAT, while its remaining 38.92% stake in Ensign will be recognised as an associate company.
The dividend remains one source of support. DBS says StarHub’s management remains committed to paying at least 6 cents per share for FY2026, while RHB forecasts a dividend yield of 6% from FY2026 to FY2028.
RHB says downside risks include weaker-than-expected earnings and margins, competition and regulatory setbacks. Upside risks include easing competition from industry consolidation and stronger-than-expected earnings, though the research house says such upside risks are receding as price competition intensifies.
As at 11.08 am, shares in StarHub are trading 1 cent lower, or 0.99% down, at $1.
