Daiwa: StarHub shows ‘green shoots,’ but winter isn’t over

StarHub billStarHub bill

StarHub’s first quarter results showed some encouraging “green shoots,” but the telco still faces “critical challenges,” Daiwa said in a note Friday.

The telco reported Friday its first quarter net profit attributable to shareholders fell 14.2 percent on-year to S$54 million on lower revenue from mobile and pay TV despite overall revenue growth. StarHub also lowered its dividend payment.

Daiwa said the results “do not paint a pretty picture,” with net profit coming in 6.7 percent below its forecast. But it noted that excluding the losses in its cyber-security division, net profit would have risen by around 3 percent.

“As profitability here would improve with economies of scale, we think there is no cause for alarm,” it said.

“On balance, we think there are early signs of success of its transformation strategy, which is most visible in its costs model and subscription trends,” Daiwa said. “However, we still believe the company needs to navigate some critical challenges in the pay TV market in the months
ahead.”

Daiw said its forecasts for 2019-21 earnings per share are 17-30 percent below consensus on a more bearish view of the cyber-security losses and on expected spectrum costs.

But it added it believed the outlook is “sufficiently discounted” in StarHub’s share price.

It kept a Hold call and S$1.48 target price.

The stock ended Monday down 1.30 percent at S$1.52.

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