StarHub Limited – Still in hyper-competition mode

 

StarHub Limited Mobile competition clouds outlook

StarHub Limited – Spike in mobile subscribers

StarHub Limited – Service revenue stalling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

StarHub Limited – Mobile competition intensifying

 

 

Results at a glance

 

 

 

 

 

 

 

 

 

 

The Positives

+ Strong cybersecurity revenue. Cybersecurity expanded 37% YoY to S$73mn. Excluding D’Crypt, Ensign's revenue would have jumped 54% to S$64.7mn. The surge in revenue was due to project delivery, and 1Q is typically weak on a seasonal basis. Ensign continues to add headcount and fixed costs, which affect its profitability.

 

The Negative

- Weakness in mobile APRU. Mobile revenue declined 4.5% to S$145mn. The large drag in revenue stems from lower postpaid ARPU and competition. Apart from competition, excess data and voice usage charges have been falling as packages enjoy higher bandwidth.

StarHub Limited – Pop in dividends

 

 

The Positives

+ Jump in dividends supported by FCF. The final dividend was 4.2 cents, up 68% YoY. Full-year dividend payout was 80%. It aligns with management guidance to distribute at least 80% of earnings or 5 cents, whichever is higher. The company mentioned it generated a free cash flow (FCF) of S$186mn, sufficient to cover the S$115mn in dividends. However, we believe lease payments of S$37mn should be deducted from FCF as it is operating in nature.

 

 

The Negative

- Slower services revenue. Service revenue declined 1.4% YoY in 4Q23 to S$527mn, the first decline in two years. Most segments were weak. Despite roaming revenue, mobile ARPU only rose 3% YoY to S$33. Entertainment revenue declined due to the absence of World Cup 4Q22. ARPU for broadband was flat YoY at S$34 as competition is accelerating ahead of the entry of Simba, the fourth mobile operator.

StarHub Limited – Dare+ investments ending soon

 

The Positive

+ Jump in cybersecurity. Cybersecurity registered a record revenue of S$115mn in 3Q23. Project details were not disclosed but the orderbooks and project pipelines remain healthy. There have been new solutions in AI and automation.  

 

The Negative

- Competition pressing down ARPUs. Competition is pressing down ARPU in mobile and broadband. ARPU was flat QoQ in 3Q23. Mobile is facing price competition from MVNOs, whilst broadband operators are pricing down ahead of the Simba.

 

Outlook

With Dare+ investments near completion this year, we expect an improvement in earnings for FY24e. The trajectory of earnings post Dare+ investment hinges on the new revenue opportunities resulting from the revamp of the IT systems. A wider suite of services with better customisation features are some of the benefits. Capex spending will be replaced with opex, such as the greater use of cloud solutions. Opex should also reduce in FY24 as overlapping legacy systems and costs are decommissioned.

StarHub Limited – Profit guidance raised 3 to 7%

 

 

 

The Positives

+ Strong growth in mobile revenue. 2Q23 mobile revenue rose 12% YoY to S$150mn from an increase in both ARPU and subscribers. The strength in ARPU is from higher roaming revenue, recontracting to higher priced plans and an increase in value added services (such as cyber protect plus).

 

+ Strength in entertainment revenue. Entertainment (or payTV) grew revenues on the back of higher ARPU from English Premier League (EPL). EPL has also helped in driving up advertising and commercial revenue.

 

 

The Negative

- Weakness and restructuring in enterprise revenue. Enterprise revenue (network, cybersecurity, regional ICT) was flat YoY in 2Q23. The bulk of the decline was from regional ICT business, lower hardware sales and discontinuation of legacy business in JOS Singapore.

StarHub Limited – DARE+ Drag Delayed

 

 

The Positive

+ Roaming revenue lifted mobile. Mobile revenue rose 13.4% YoY to S$152mn, supported by both ARPU and subscriber growth. Roaming is the largest driver of ARPU recovery despite ongoing migration to SIM only. Prepaid remains challenged with sluggish net adds and lower prices.

 

The Negative

- Weakness in broadband. Excluding the MyRepublic acquisition, broadband revenue declined an estimated 5% YoY to S$49mn. Broadband is facing higher price contribution. ARPU and subscribers were basically flat QoQ. The acquisition of MyRepublic has only lifted StarHub broadband ARPU by S$1 to S$34. The launch of SIMBA (formerly TPG) broadband plans will further pressure prices.

StarHub Limited – Another year of heavy investments

Source: Company, PSR

 

The Positive

+ Strength in mobile revenue. 4Q22 mobile revenue growth accelerated 13% YoY. Growth rates not seen since FY05. Revenue growth was driven by both ARPU and subscriber growth. Re-opening of borders continues to bolster roaming revenue and lift ARPU. Postpaid net adds were 19k (3Q22: +26k) and market share has widened by 0.9% points over the past 12 months to 23.4%.

 

The Negatives

- 4Q22 operating expenses outpacing revenue. Operating expenses jumped 35% YoY to S$667mn. Excluding the S$30.8mn non-current, the rise will still be high at 29% YoY. Types of cost that outpaced revenue were repairs and maintenance, marketing and Pay TV content cost.

- Drop in dividends. FY22 dividend was down 22% to 5 cents. FY23e dividends guidance is unchanged, a payout of at least 5 cents. With CAPEX to sales ratio expected to double from 7.3% in FY22 to between 13-15% in FY23e, there is little upside in dividends.

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