Higher cost expected in FY23e. The investments in StarHub’s DARE+ transformation (2022-26) is raised by S$40mn to S$310mn due to increased investments in cloud infinity. Around 24% or S$75mn (Figure 1) has been spent in FY22e including EPL costs, 5G and start-up costs of new businesses. Another S$150mn is expected to be spent in FY23e. The doubling of investments over FY22e is due to the 3-5 month delay in implementation plus an increase in budgeted investments.
Figure 1: Huge opex coming in FY23e
Bulk of the cost savings in IT. Based on the DARE+ transformation roadmap, cost saving and profit growth of S$105mn will materialise in FY24. Around 90% are cost savings. We expect the bulk of the cost savings from FY24 to come from lower maintenance cost and software license fees of legacy systems. Another area of cost saving will be the reduced footprint of physical stores as the business model turns more digital.
Revenue opportunities are less visible. We were less clear on the revenue opportunities post the DARE+ transformation. In consumer mobile, new verticals are being introduced including Gamehub (allowing consumers to play games with expensive hardware with the use of cloud), Protecthub+ (device security and hardware replacement) and Lifehub (mobile health services partnering Alexandra Hospital). The priorities for Ensign are to expand regionally and proprietary solutions (e.g. AI cyber detection).