StarHub on Aug 14 announced its 1HFY2024 ended June results, which saw earnings growth of 7.1% y-o-y to $82.1 million from $76.7 million a year ago, while total revenue remained flat at $1.1 billion, unchanged from a year ago.
Service revenue gained 2.4% y-o-y to $939.2 million, lifted by strong growth in the group’s enterprise business.
Consumer average revenue per user (ARPU) remained flat across most segments due to sustained intense market conditions.
See more: StarHub posts 7.1% increase in 1HFY2024 earnings as DARE+ starts to bear fruit
Following the results announcement, CGS International has kept its “add” recommendation on StarHub with a target price of $1.40, higher than $1.30 previously.
Analysts Kenneth Tan and Lim Siew Khee like StarHub for its strong FY2025 earnings turnaround prospects.
See also: RHB initiates coverage on CSE Global with ‘buy’ call with TP of 58 cents.
StarHub shared that its DARE+ transformation progress was on track with management’s expectations of incurring the bulk of DARE+ investments (90%) by end-FY2024.
“While management did not disclose the exact amount of DARE+ costs incurred YTD, we believe investments would be more back-weighted in 2HFY2024. Despite the higher investment costs ahead, we believe StarHub’s margins should only decline slightly h-o-h, as the group realises early benefits from cost cuts and reduction in depreciation expenses,” say the analysts.
Similarly, DBS Group Research is keeping its “buy” recommendation and $1.54 target price on the stock.
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The group has revised its DARE+ programme again, with 10% of the residual cost to be incurred in FY2025.
The group expects 10% of the $270 million DARE+ costs (55% capex, 45% opex) to delay to FY2025, compared to none earlier. StarHub maintain service revenue growth of 1-3% and service EBITDA margin of 22% for FY24F despite changes to the DARE+ programme.
“We continue to like the stock for its 8% earnings CAGR over FY2023-FY2025, coupled with 5.8% dividend yield (FY2024 DPS of 7.4 cents),” say the DBS Reseach team.
On the other hand, RHB Bank Singapore is less bullish, as it keeps its “neutral” call and $1.18 target price on StarHub.
StarHub’s 1HFY2024 results were broadly in line with the routine weakness in the mobile segment, offset in part by enterprise gains. “While its multi-year transformation investments should start to taper off by the year-end, the timing and magnitude of benefits remain uncertain, in our view,” say the Singapore Research team.
Meanwhile, the RHB Singapore Research team notes that competition remains stiff at the lower-end of the mobile market. The shift to SIM-only plans dominates postpaid additions with postpaid ARPU falling for the second quarter in a row while prepaid ARPU held steady.
StarHub’s defence has been its Infinity Play value proposition and product bundles with differentiated or superior service quality. A targeted channel approach via mobile virtual network operators (MVNOs) allows it to minimise cannibalisation of its own base.
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Broadband revenue in 1HFY2024 fell 1.4% on lower premiums, partially offset by better take-up of higher-speed fibre broadband packages (12-fold jump in 10Gbps fibre broadband subs since December 2023).
“We believe most fibre broadband customers are on HomeHub bundles which offer good customer retention,” say the research team, noting that the 1HFY2024 entertainment revenue was stable-o-q but down 4% y-o-y from the cessation of tactical promotions, partially mitigated by higher Premier League advertising revenue.
As at 3.00pm on Aug 15, shares in StarHub were trading at $1.28, 2.4% up for the week.
