5 impressive things about StarHub's second quarter performance

Earnings beat market's estimates.

According to Nomura, there are five arguments in favour of StarHub which can be reflected from its performace in the second quarter.

Here's more from Nomura:

1) it reported another decent result, with 2Q13 EBITDA/NPAT exceeding market estimates by 5%/13%;

2) its 31% margin guidance for FY13 looks conservative and implies around 28% margin in 2H13 (34% in 1H) – sub-30% margin hasn’t been seen since 2010 despite new handset launches;

3) data repricing is starting to show some benefits – its postpaid wireless APRU rose 6% q-q;

4) although competition could pick up in 2H post the recent ruling on Barclays Premier League (BPL) cross carriage, we think StarHub can use some of the capital it would have otherwise deployed on purchasing content to gain/retain subs; a

5) its 4.7% yield is appealing. Prima facie, StarHub has been an easy bear-case to mount – it looks expensive on P/E and there are competitive risks across its key businesses.

But, for the past few years, StarHub has been able to navigate these challenges well and has generally surpassed our bearish expectations.

Result highlights – Some joy, some questions. 2Q13 revenue was flat, but expenses fell 3% and EBITDA rose 7% y-y. NPAT was up 16% to SGD101mn.

Wireless revenue grew 3%, driven by 32k net adds and 2-3% ARPU increase. Pay-TV and broadband sub losses continued, while ARPUs were stable and fixed revenue rose 2%.

On the BPL cross-carriage, management said that it doesn’t expect a significant impact on its financials this year and noted that some of the SGD300 rebate that it is offering can be recovered from the carriage fee it receives from SingTel, but it is more optimistic on improving churn rates.

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