UOB KayHian: Raising Starhub target as execution improves

StarHub retail store at Singapore’s VivoCity mall; taken September 2018.StarHub retail store at Singapore’s VivoCity mall.

StarHub’s execution has improved since its new CEO Peter Kaliaropoulos has taken over and the telco is set to benefit from changing market dynamics, UOB KayHian said in a note on Monday.

“The valuation discount imposed on StarHub should be rightfully reduced,” it said.

It raised its target price to S$2.10 from S$1.92, on a reduced cost of equity, and kept a Buy call.

The new CEO has brought improvements in execution since his 9 July start and channel check show signs of improved customer service, UOB KayHian said.

“Within two months of his appointment, StarHub has scaled up in cyber security with the merger of Accel Systems & Technologies with
Temasek’s Quann World to form Ensign InfoSecurity,” it noted.

At the same time, StarHub is looking to differentiate itself with better customer service, it said.

“It has integrated customer service touchpoints like retail centers and My StarHub app. StarHub seeks feedback by sending customers a simple SMS, with just four questions, to rate the service they have just received,” it noted.

In addition, recent developments with Singapore’s planned fourth telco TPG and with plans to take over M1 could benefit StarHub, UOB KayHian said.

Previously, the brokerage had expected StarHub would drive industry consolidation back to three mobile players in Singapore in two to three years, but the planned spinoff of TPG’s Singapore operations into a separate entity and Keppel and SPH’s bid for control of M1 have changed the calculus, it said.

While before the recent developments, it had viewed StarHub as likely to acquire M1, it now expects that either StarHub or M1 could acquire TPG Singapore or StarHub and M1 could seek a merger of equals, it said.

Shares of StarHub were at S$1.84 at 9:05 A.M. SGT.

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