SINGAPORE (Nov 7): StarHub has announced a 11.5% fall in 3Q17 earnings to $76.2 million from $86 million last year.
The group’s revenue was also down by 0.8% to $580.4 million, mainly attributed to lower service revenues from Mobile, Pay TV and Broadband services, as well as lower sales of equipment, partially mitigated by higher revenue from Enterprise Fixed Services.
StarHub has recommended an interim dividend of 4 cent per share in 3Q17, which came up 20% lower than the interim dividend of 5 cents per share in the same period last year.
See: StarHub's 3Q earnings down 11.5% to $76.2 mil
OCBC is maintaining its “sell” call on StarHub with a target price of $2.30.
In a Friday report, analyst Eugene Chua expects the group to perform weaker in 4Q17.
Meanwhile, Chua foresees that the group’s service revenue in FY17 will be flat, while EBITDA margin will be between 26-28%, due to higher costs for customer acquisitions (handset subsidies), less adoption grants from the Next-Generation Nationwide Broadband Network (NGNBN) and negative impact of stronger USD on payments for smartphones and content.
The analyst also expects cash capex to decrease to 13% of total revenue (excluding any spectrum payments) compared to previous guidance of 10%.
Although 9M17 EDITDA margin was higher at 31.8% relative to its guidance, the group’s management guided that they expect higher handset subsidies in 4Q17.
With the upcoming entry of TPG and alternative TV viewing platforms, the group’s mobile and pay TV will continue to be under pressure.
“While enterprise segment seems to be gaining traction as it ramps up on its ICT-related business with a suite of solutions offered, we prefer to wait for consistent performance before reviewing this segment’s ability to offset weakness from the mobile and PayTV segments,” says Chua.
On the other hand, UOB Kay Hian is maintaining its “hold” recommendation on StarHub with a target price of $2.62.
In a Friday report, analyst Jonathan Koh says that the subsidy amount for the new iPhone X is similar to previous generation of smartphones, but its volume is expected to be substantial in 4Q17.
Hence, the group’s management has has lowered its guidance for capex from 13% to 10% of total revenue (exclude spectrum payments) due to the securement of better terms from equipment vendors and timing of commissioning for certain projects.
In addition, the group has invested in new capabilities to provide a wider array of systems and solutions.
It will focus on managed services for large enterprises and government agencies, which is more sustainable and provides continuity for growth.
It also provides datacentres, analytics and cyber security. StarHub’s management disclosed that the newly-acquired Accel Systems & Technologies contributed revenue of $7 million, which is one-third of the growth for data & internet business in 9M17.
Moreover, the group was among six firms to be awarded a three-year contract worth $50 million to ensure that the government’s websites are fully available during a cyberattack.
StarHub has also entered into a partnership with OCBC to bring together businesses across various industries. They will invest $6 million in research and technology over the next year.
They will then leverage on data insights to understand customers’ needs and deliver relevant solutions to their combined customer base of 5 million customers.
The concept will be rolled out in OCBC branches and StarHub outlets overtime.
As at 11.25am, shares in StarHub are trading at $2.73.
