- BUY Entry 1.27 – Target – 1.40 Stop Loss – 1.20
- StarHub is a Singapore company that delivers communications, entertainment and digital services. With its fibre and wireless infrastructure and global partnerships, it brings to people, homes and enterprises mobile and fixed services, a broad suite of content, and a diverse range of communication solutions. It develops and delivers to corporate and government clients solutions incorporating artificial intelligence, cybersecurity, data analytics, Internet of Things and robotics.
- Read through from Aztech’s strong IoT segment. IoT play, Aztech recently announced fairly strong results, aided by its IoT segment. 1H22 revenue and earnings came in at 47%/50% of street expectations with a 46%/45.7% YoY jump to S$364.6m/S$42.8m respectively. Notably, management remained sanguine about global demand for IoT related devices and smart lighting solutions with revenue from IoT and Datacom Products swelling 52.5% YoY to S$354.9m. The strong IoT device sales imply increasing demand for 5G connectivity, and could underpin 5G plan signups by local telcos such as StarHub, thereby improving ARPU. Notably, StarHub has been seeing steadily improving postpaid ARPU (1Q22: S$29 vs 1Q21: S$27) for mobile uses, coupled with sustained 5G market lead with >300,000 5G subscribers as at end 4Q21.
- Recent Premier League Rights deal could lift STH’s entertainment segment. STH announced in February 2022 that it had secured the right to present EPL for the next six years and was rolling out open, agile, and flexible access to customers. Based on the media reports, STH’s S$19.90/month subscription price for EPL (vs Singtel Cast’s S$49.90/month previously) has been well received. This could ultimately bolster STH’s entertainment segment, which contributed about 11.3% to 1Q22 revenue.
- Downcast forecasts could provide scope for upside surprises. The Street currently has 4/11/2 BUY/HOLD/SELL ratings and an average TP of S$1.34. Based on consensus estimates, FY22F gross revenue should pick up by 10.9% YoY to S$2.27bn although EBITDA could see a 12.7% YoY decline. In line with this, the street is expecting FY22F DPU to decline to 5.4¢ (FY21: 6.4¢). Nonetheless, at current prices, STH would trade at a still fairly attractive 4.3%/4.8% FY22F/23F yield. STH is due to announce 1H22 results on 4 August after trading closes.