Daiwa: StarHub is not out of the woods, but mobile offers some positives

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StarHub’s lower-than-expected second-quarter results show the telco isn’t out of the woods, but there were still positive signs, Daiwa said in a note last week.

Tuesday StarHub reported its second quarter net profit dropped 36.1 percent on-year to S$39.5 million amid lower contributions from mobile, pay TV and broadband.

Pay TV revenue fell 23.6 percent on-year in the quarter to S$64.7 million, mainly on a lower subscriber base, while broadband service revenue fell 2.2 percent on-year to S$45.1 million, mainly on lower average revenue per user (ARPU), StarHub said.

Daiwa said the sharp decline in performance from pay TV and broadband were among the key negative surprises, adding that management had said it was offering customers promotional discounts and “zero-cost” offers to entice them to switch from cable TV to fiber TV.

But the investment bank added customer additions in post-paid mobile were strong.

StarHub reported mobile service revenue for the second quarter fell 9.9 percent on-year to S$192.3 million, but post-paid mobile subscribers rose by a net 39,000 in the quarter to 1.477 million as of end-June.

Daiwa said the additions indicate StarHub’s overhaul of its price offers was gaining traction.

“Overall, we believe the results continue to suggest StarHub is finally regaining its lost competitive streak especially in the post-paid market, though it is not completely out of the woods,” Daiwa said. “The migration of pay TV customers to the fiber platform is of concern to us (deadline of 30 September), as validated by the worse-than-expected second quarter of 2019 pay TV operational trends.”

Daiwa kept a Hold call with S$1.48 target price.

“We believe this outlook is sufficiently discounted in the share price,” Daiwa said.

Shares of StarHub ended Thursday flat at S$1.45; Singapore’s stock market was closed Friday and Monday for public holidays.

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