Its defensive line will soon be broken?
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OCBC
By Carey Wong
Fri, 7 May 2010, 09:14:01 SGT
Summary: StarHub Ltd reported its 4Q09 results last evening. While revenue of S$557.2m, up 5.0% YoY and 1.3% QoQ, was 1.3% ahead of our forecast, net profit crashed 48.3% YoY and 42.5% QoQ to S$42.7m, or 43.1% below our estimate; this after its operational EBITDA margin tumbled from 33.0% in 1Q09 and 29.2% in 4Q09 to 22.5% on sharply higher handset costs/subsidies. For the rest of 2010, StarHub maintains its previous revenue guidance of low single-digit growth, but revises down its operational EBITDA margin to around 28% of service revenue from the 30% guidance earlier to account for higher subsidies for handsets and some other operating costs. Nevertheless, it maintains that its total capex spending will not exceed 14% of operating revenue and reiterated its guidance for 5c per quarter dividend for FY10. To account for the latest EBITDA margin contraction, we pare our FY10 earnings forecast by 9.3% (but raise our revenue by 1.5%); this in turn lowers our DCF-based fair value to S$2.32 (prev: S$2.44). But since total return is still around 11.0%, we maintain our BUY rating. (Carey Wong)
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