StarHub - 1H22 A Beat; Overhang Likely Given Weak 2H
- StarHub (SGX:CC3)'s 1H22 EBITDA eased 7.5% y-o-y (-11.5% h-o-h) as the lower margin more than offset higher revenue. This led to core earnings per share (EPS) falling 12.1% y-o-y (-23.9% h-o-h). Nonetheless, 1H22 core EPS was a beat at 76% of our FY22F estimate (55% of consensus) due to lower-than-expected depreciation. As expected, 1H22 dividend was S$0.025 (same as 1H21).
- Better revenue y-o-y across the board…
- 1H22 mobile service revenue rose 3.8% y-o-y (-1.0% h-o-h).
- 1H22 Fixed Enterprise revenue climbed 16.9% y-o-y (+4.7% h-o-h), owing to the consolidation of HKBN JOS Singapore & Malaysia and cybersecurity growth (+4.1% y-o-y), which more than offset weaker network solutions revenue (-3.4% y-o-y).
- 1H22 Broadband revenue was up 21.4% y-o-y (+17.1% h-o-h) on consolidation of MyRepublic Broadband (MRB) and 2Gbps adoption; ex-MRB.
- 1H22 Entertainment revenue grew 4.7% y-o-y (+7.7% h-o-h) on strong net adds.
- …but EBITDA margin was down; costs to rise further in 2H22F. StarHub reiterated its FY22 EBITDA margin guidance of at least 20% as it expects opex to pick up in 2H22 for IT transformation, 5G wholesale, staff, utilities (inflationary) and English Premier League (EPL) content cost/marketing.
- We raise FY22-24F EPS forecast for StarHub by 19.9-26.9%, mainly to factor in lower depreciation.
- We retain StarHub’s target price (still applying 20% discount) as we rollover the DCF base year, offset by 25bps higher risk-free rate of 2.75% (recent rise in government bond yields), while the depreciation adjustment is non-cash. We reiterate HOLD call on StarHub given the weak 2H22F earnings outlook.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
FOONG Choong Chen CGS-CIMB Research | Sherman LAM Hsien Jin CGS-CIMB Research | https://www.cgs-cimb.com 2022-08-04 2022-08-04
Previous report by CGS-CIMB:
2022-02-14 StarHub - Big Core EPS Drop In FY22; Revisit In 1H23
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