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Brokers’ take

This article is more than 12 months old

Compiled by Leila Lai


MAY 6 CLOSE: $1.52

OCBC Investment Research, May 6

StarHub's Q1 2019 results were within our expectations.

The group's Patmi (profit after tax and minority interests) fell 14.2 per cent year on year to $54 million, which constitutes 27.7 per cent of our full-year forecast.

The group has declared a dividend per share of 2.25 cents, which is a steep but well-expected cut from four cents in Q1 2018.

In the mobile space, we note that the group has added 74,000 post-paid subscribers to its customer base, which we believe stems from greater SIM-only take up.

Unsurprisingly, this has continued to weigh on average revenue per user, which has dropped by $4 year on year to $39. Management believes this trend would likely continue until the end of 2019.

Management is currently still in the process of negotiating with content providers (as contracts come up for expiry) to operate on a variable Pay TV cost model, rather than a fixed cost one. As we understand, there is one more major contract left to renegotiate.

The group continues to articulate its intention to capture opportunities in the cyber security business, but the timeline as to when it turns Ebitda (earnings before interest, tax, depreciation and amortisation) positive remains unclear.

Since our downgrade in mid-February, the stock has declined by 16.8 per cent. StarHub is now trading at an enterprise value/Ebitda multiple of 6.3 times, which is 2.3 standard deviations below its five-year mean.

We maintain our fair value of $1.64 for now.


MAY 6 CLOSE: $25.85

Phillip Capital Research, May 6

Q1 2019 revenue and Patmi were in line with our estimates, meeting 25 and 24 per cent of our full-year forecasts respectively.

Net interest margin fell five basis points year on year and one basis point quarter on quarter to 1.79 per cent due to competitive loan repricing conditions and excess deposits gathered. Loan to deposit ratio fell to 86.6 per cent (Q4 2018: 88.2 per cent).

Robust loans growth of 12.2 per cent year on year was led by a broad-based increase across all territories and industries. Trading income and gain from investment securities rose 38.9 and 133.3 per cent year on year respectively, benefiting from a rebound in financial markets.

Downgrade to "accumulate" with a lower target price of $30.90, due to recent share price movement. The lower target price was derived after raising our operating expense forecasts 5 per cent higher, giving us an FY19E cost-to-income ratio of 44 per cent (previously 42 per cent).

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