StarHub - DBS Research 2023-11-09: Pleasant Surprise From Lower Transformation Costs

• StarHub (SGX:CC3)'s 3Q23’s net profit of S$37.3m (-4.8% q-o-q, +37% y-o-y) was 10% higher than the consensus due to lower-than-expected transformation and depreciation costs.
• StarHub recorded a Service EBITDA of S$106.4m (-2.5% q-o-q, +6.7% y-o-y) in 3Q23, which 2% higher than our expectations.

3Q23 results beat street expectations

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• More importantly, StarHub's net profit rose much faster than service EBITDA due to a drop in depreciation and finance costs.
• Service revenue was S$526.0m (+10% q-o-q, +8.9% y-o-y) in 3Q23.

Mobile revenue rose sequentially.

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• Broadband service revenue was S$62.4m (-0.3% q-o-q, -1.9% y-o-y), based on intensifying market competition.
• Entertainment revenue came in at S$56.7m (-0.2% q-o-q, +2.3% y-o-y), as y-o-y growth was driven by higher subscription revenue, commercial TV, and ad revenue – mostly from the Premier League.
• Enterprise business reported revenue of S$253.6m (+23% q-o-q, +15% y-o-y) lifted mainly by Cybersecurity services, which had a revenue of S$115.1m (+52% q-o-q, +45% y-o-y) due to higher project recognitions.

StarHub maintained its service revenue guidance of +3-+5% y-o-y growth for FY23F and service EBITDA margin of 22%. Furthermore, CAPEX commitment guidance for FY23F was also maintained as 11-13% of total revenue.

Automatic termination date extended for Ensign.

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Sachin MITTAL DBS Group Research | https://www.dbs.com/insightsdirect/ 2023-11-09 SGinvestors.io

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