As such, he raised his discounted cash flow (DCF) long-term growth assumption to 1% from 0.5%, and lifted StarHub’s target price to $1.35.
Investors should temper expectations around Simba’s ability to disrupt. “While investors see Simba as a lean and unencumbered play, we don’t see it the same way post M1 acquisition. With M1 contributing about 75% of merged entity revenues, legacy exposures such as roaming and caller ID remain broadly in line with incumbents,” notes the analyst.
He also flags structural constraints for the mergedco. ARPU levels of M1 and its rivals have “largely converged”, while network performance gaps are unlikely to shift consumer behaviour in Singapore’s WiFi-saturated market.
Moreover, cost synergies “look limited given Antina’s shared structure and low overlap in sales/opex”, with potential spectrum return and regulatory risks adding further uncertainty.
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Saifee expects mergedco’s leverage to rise to about four times net debt/ebitda. Meanwhile, StarHub is positioned to take advantage of market shifts, particularly through pressure on mobile virtual network operators (MVNOs).
“We think StarHub is likely to squeeze out third-party MVNOs using its own flanker brands such as Giga and Eight,” he wrote, adding that bigger third-party MVNOs in Singapore are wholesaling capacity from M1. “[As such,] if they are squeezed out, leading to either exiting the space or being overtaken by the MNOs, it’s an even bigger risk for M1.”
Global precedents support this view, with telco consolidation typically lifting industry revenue growth by 4% to 6% annually as competition normalises. “Based on our analysis of global case studies above, we expect mobile revenue growth in Singapore to improve to 4% to 5% per over 2026 to 2027 on potential competitive rationalisation. We [therefore] raise StarHub mobile revenue growth expectations by 2% to 6% for FY2027 to FY2028. Further factoring a 80% pass-through of the same on ebitda, we lift our ebitda estimates by 3-6% for StarHub,” notes the analyst.
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He adds that StarHub trades at -1 standard deviation PE/EV/ebitda yet offers a defensible 6% dividend yield.
As at 2.38 pm, shares in StarHub are trading 2 cents lower or 1.75% down at $1.12.
