StarHub - CGS-CIMB Research 2022-11-10: 3Q22 Above But Not Out Of The Woods Yet

StarHub - 3Q22 Above But Not Out Of The Woods Yet

  • StarHub (SGX:CC3)'s 3Q22 EBITDA eased 17.5% y-o-y (-9.2% q-o-q) as lower margin more than offset higher revenue. This led to core EPS falling 31.5% y-o-y (-10.8% q-o-q). However, 9M22 EBITDA/ core EPS tracked ahead at 78%/89% of our FY22F forecasts as the booking of Dare+ transformation cost has been slightly deferred.
  • StarHub raised its guidance for FY22 service revenue growth to 12-15% (in line with our forecast; previous: > 10%) and lowered capex-to-sales to 9-12% (previous: 12-15%). The latter is due to some delays in Dare+ and IT transformation execution into FY23.
    • StarHub's 3Q22 mobile service revenue was largely in line, up 8.7% y-o-y (+6.6% q-o-q).
      • Postpaid ARPU rose a robust 6.9% q-o-q (+10.7% y-o-y) as higher roaming and value added services more than offset rising take-up of SIM-only plans while postpaid subs posted another decent gain of 1.7% q-o-q.
      • For prepaid, ARPU was steady q-o-q, with subs up strongly by 7.3% q-o-q on a recovery in tourist SIM sales.
    • StarHub's 3Q22 Fixed Enterprise revenue climbed 16.3% y-o-y (+6.9% q-o-q), led by higher network solutions (+6.7% y-o-y) and regional ICT services (+1.2x y-o-y; owing to consolidation of HKBN JOS Singapore & Malaysia) revenues.
    • Meanwhile, entertainment revenue climbed 17.6% y-o-y (+12.6% q-o-q) due to higher Premier League (EPL) subs and advertising revenue.
    • Similarly, broadband revenue jumped 28.2% y-o-y (-1.2% q-o-q) on consolidation of MyRepublic Broadband and 2Gbps adoption.
  • 3Q22 service EBITDA margin narrowed sharply by 9.4% points y-o-y to 20.6% on higher costs for staff, marketing (one-off, EPL-related), network and IT transformation initiatives and utilities. StarHub kept its FY22 guidance of margin at > 20% as it projects a pick-up in costs for EPL, World Cup content/marketing and IT transformation in 4Q22.
  • As part of Dare+, StarHub will also review its regional ICT business and write off certain legacy network assets in 4Q22.
  • StarHub said the write-off will not affect its dividend-paying capacity (one-off in nature, will not adversely impact its retained earnings too substantially).
  • We raise FY22F core EPS forecast for StarHub by 16.5% and cut FY23F’s by 11.2% as we shift some Dare+ costs to FY23F while FY24F’s is cut 9.5% to bake in higher opex/depreciation.
  • Our target price for StarHub falls 21% (still applying a 20% discount) from earnings cuts (from FY23F) and higher risk-free rate of 3.5% (previous: 2.75%, higher 10-year Singapore government bond yields) .

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

FOONG Choong Chen CGS-CIMB Research | Sherman LAM Hsien Jin CGS-CIMB Research | 2022-11-10
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.10 DOWN 1.400

Previous report by CGS-CIMB:
2022-08-04 StarHub - 1H22 A Beat; Overhang Likely Given Weak 2H

Target prices by 2 other brokers at StarHub Target Prices.
Listing of broker reports at StarHub Analyst Report.

Relevant links:
StarHub Share Price History,
StarHub Announcements,
StarHub Dividends & Corp Actions,
StarHub News Articles


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