CGS-CIMB upgraded StarHub to Add from Hold, saying management is executing well on its efforts to cut operating and capital expenditures.
“This should help to buffer against adverse revenue effects from TPG’s entry, which should give investors greater confidence on earnings delivery and act as a re-rating catalyst,” the brokerage said in a note Wednesday.
StarHub reported Tuesday its third quarter net profit rose 2 percent on-year to S$58 million despite lower revenue from mobile, pay TV and broadband, as operating expenses fell.
CGS-CIMB said the results beat its expectations, with nine-month core earnings per share coming in at 99 percent of its full-year forecast.
The brokerage raised its 2019, 2020 and 2021 earnings per share forecasts for StarHub, by 22.3 percent, 66 percent and 26.5 percent, respectively, to factor in lower operating expenditures, including from terminating a network lease agreement with Singtel from 2020 and removing the 700MHz spectrum amortization.
But it kept its target price at S$1.65 on expectations for 5G spectrum and network rollout capex starting from 2021.
Shares of StarHub surged 9.09 percent to S$1.44 by 1:01 P.M. SGT.