Telco StarHub has been steadily buying back shares in the fortnight after the telco reported its 3QFY2022 ended September earnings that drew mixed reactions from the market. The company generated higher revenue of $590.8 million in that period, up 14.2% y-o-y. However, earnings was down 32% y-o-y to $27.4 million as higher costs bite.
The most recent buyback was on Nov 21 when StarHub bought back 41,200 shares at $1.05. This brings the total number of shares bought back under the current mandate to nearly 2.84 million shares or 1.63% of the total share base. Before this, StarHub on Nov 15, 16, 17 and 18 acquired a total of 1,185,000 shares at between $1.04 and $1.05.
In his Nov 10 note, Maybank Securities analyst Kelvin Tan kept his “buy” call on the stock but with a slightly higher target price of $1.33 from $1.32 previously. He notes that the company’s 9MFY2022 ended September earnings had met his expectations, although it was apparent StarHub was incurring higher costs.
A significant earnings improvement for the whole of FY2022 is not expected. “Unless roaming revenue gains momentum or fresh revenue begins to contribute meaningfully, we think earnings will be sluggish in 2H22,” says Tan, who describes the current FY2022 as a “transition year” as the telco commits necessary investments so that it can capture new growth areas.
“However, amid price rivalry and inflation, Starhub is well-placed to capture the roaming recovery and opportunities when China’s economy eventually reopens. We believe it is on track to beat its own guidance and to continue to offer a 4% sustainable annualised dividend yield,” he says.
For now, Tan has raised his target price slightly to take into account potentially higher earnings contribution from broadband and enterprise. Tan has raised his earnings forecasts for the coming FY2023 and subsequent FY2024 by 6.7% and 5.4% respectively.
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Year to date, StarHub shares have dropped by nearly a quarter to close at $1.05 on Nov 23, valuing the company at just over $1.8 billion.
According to data collected by Bloomberg, the target prices for StarHub range from as low as 99 cents by Macquarie to as high as $1.70 by Goldman Sachs.
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Up 11% over past month
The Singapore Exchange (SGX) has also been steadily buying back shares since the start of October and well into this month. The buybacks continued as SGX’s shares gained by around 11% thus far this month, outperforming the Straits Times Index’s corresponding gain of around 2%.
The most recent buyback was on Nov 21 when it acquired 71,000 shares at $9.26. This brought the total number bought back under the current mandate to just over 1.07 million shares or 0.1% of the total share base.
This month alone SGX also bought back shares on Nov 2, 4, 8, 16 and 18. Capping its buyback at 71,000 shares per day, its purchase price ranged from $8.38 to $9.38.
In his Nov 23 note, RHB analyst Shekhar Jaiswal kept his “neutral” call and $9 target price on the stock. “After the recent rebound in SGX’s share price, the stock looks fairly price, amidst a muted earnings outlook,” he says.
With this recent gain, Jaiswal’s forward earnings estimate for SGX has hit 22.2x, which is in line with its historical one-year forward P/E of 22.1x. “Going forward, the expectation of a muted SDAV outlook could pose a downside risk to our and consensus estimates. This could keep investors at bay for now,” he says.
According to Bloomberg collation of analysts’ recommendations and target price made after SGX announced its most recent full-year earnings on Aug 18, Jaiswal’s target price of $9 is on the conservative side. The most bullish call for now is by Maybank Securities to “buy”, along with a target price of $10.65.
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