SINGAPORE (Feb 24): Analysts are mostly positive on StarHub as FY20 is expected to be more stable for the group.
See: Analysts have mixed calls on StarHub amid stiff competition, 5G uncertainties
StarHub on Feb 20 announced its 4Q19 earnings, which more than doubled by 115.6% y-o-y to $33.3 million, while revenue was down 1.8% y-o-y to $608.4 million. The key highlight was sequential stabilisation of Mobile and Pay TV revenue which had been declining sequentially over the last three quarters.
However, for the FY19 period, earnings dropped by 10.9% y-o-y to $ 178.6 million, while revenue of $2.33 billion was 1.3% lower compared to FY18.
The group delivered on its guidance to pay out dividends of 2.25 cents for 4Q19, bringing FY19 dividends to 9 cents.
The group’s outlook in FY20 will be more stable than the prior year, according to Phillip Capital in a Monday report. This is due to the group experiencing a cable to fibre migration exercise and more intense mobile price competition in FY19.
The research house recommends to “accumulate” on StarHub at a target price of $1.70.
“Our expectations are for a negative 1% decline (-7.5% FY19) in service revenue in FY20, excluding cybersecurity,” says analyst Paul Chew.
And with the group’s core revenues stable, growth will ultimately come from the cybersecurity segment. But profitability in this division will still be languishing as investments are still needed in the business.
“We believe any upside in earnings will be dependent on the management’s ability to further realign cost to the current revenue trajectory. The management track record on cost has so far been enviable,” adds Chew.
CGS-CIMB also has a “buy” call on StarHub with an increased target price of $1.80 from $1.65.
In a report last Friday, analyst Foong Choong Chen says, “We raise our FY20/21 core EPS by 8.5%/9.3%, mainly to factor in higher fixed enterprise and mobile revenue growth. Post-revision, we project core EPS to slide 18.6%/21.9%/5.2% y-o-y in FY20/21/22 as we have baked in a 7.5% per annum mobile ARPU erosion in FY20-21 due to intense mobile competition.”
Foong also like StarHub for its fairly resilient q-o-q increase in mobile service revenue and milder y-o-y growth from the enterprise segment.
As at 2.55pm, shares in StarHub are trading at $1.53 or 5.1 times FY20 book with a dividend yield of 6%, according to Phillip Capital’s estimates.
