You are on page 1of 12

Singapore Company Guide

StarHub
Version 9 | Bloomberg: STH SP | Reuters: STAR.SI Refer to important disclosures at the end of this report

DBS Group Research . Equity 4 May 2017

FULLY VALUED (Downgrade from HOLD) Entering a lower earnings phase


Last Traded Price ( 3 May 2017): S$2.78 (STI : 3,237.81) Few positives other than yield. Starhub’s profitability has been
Price Target 12-mth: S$2.33 (-16% downside) (Prev S$2.85) affected by lower grant income, higher customer acquisition and
retention costs in recent quarters. We have revised down our
Potential Catalyst: Limited uptake for TPG’s services; capex savings FY17F/18F earnings by ~17%/20% after removing adoption grant
Where we differ: Higher gearing assumptions from our model and projecting lower EBITDA margins. Our key
Analyst concern is continued loss of pay TV subscribers as it hurts Starhub's
Sachin MITTAL +65 6682 3699 sachinmittal@dbs.com hubbing strategy. While StarHub will maintain annual DPS of 16
Singapore Research Team equityresearch@dbs.com Scts in 2017, sustaining 16 Scts in the long term will require the
Suvro SARKAR +65 6682 3720 suvro@dbs.com company to gear up higher in our estimates.
What’s New 1Q17 net profit of S$73.1m (-21% y-o-y, +35% q-o-q) was 10%
• Starhub faces declining earnings in FY17 below our estimate. While service revenue declined slightly (-1% y-
o-y), the bottom line was hurt more by an absence of adoption
• Will need to lever up to fund S$350m of spectrum
grant (-S$12m on an annual basis) and higher operating expenses
payments due in 2017/18
(S$13m) due to higher cost of equipment and cost of services. Pay
• Dividends can then be maintained at 16 Scts p.a. TV subscriber loss continued while broadband subscribers also
• Downgrade to FULLY VALUED, lowered TP to declined slightly.
S$2.33
Spectrum payments of c. S$350m due. Starhub will need to fork
out around S$350m for spectrum acquired in the recently
concluded 2017 general spectrum auction, with bids for the 700
Price Relative
S$ Relative Index
MHz and 2.5 GHz spectrum lots significantly above the reserve price
5.0
215 levels. While the payment schedule is uncertain at the moment, it is
4.5
195
175 likely to be on a lump-sum basis, based on recent precedent.
155

Trade-off between leveraging up and cutting dividends. Against the


4.0
135
3.5 115

3.0
95 backdrop of projected declining earnings due to competition in the
mobile space and structural shifts in the pay TV business, we believe
75
2.5 55
May-13 May-14 May-15 May-16 May-17

StarHub (LHS) Relative STI (RHS)


Starhub will need to lever up in order to meet its guidance of
maintaining annual dividends at the 16-Sct level, which we believe
is sustainable for the next two years.
Forecasts and Valuation
FY Dec (S$ m) 2015A 2016A 2017F 2018F Valuation:
Revenue 2,444 2,397 2,397 2,375 Downgrade to FULLY VALUED with a lower TP of S$2.33. Our
EBITDA 712 689 610 611 revised DCF-based (WACC 5.6%, terminal growth 0.3%) TP is
Pre-tax Profit 440 410 319 307 S$2.33, as we factor in the contraction of earnings in the near
Net Profit 372 341 266 256 future, as well as higher interest expense from higher debt levels.
Net Pft (Pre Ex.) 357 332 266 256 The counter offers around 5.8% yield currently.
Net Pft Gth (Pre-ex) (%) (3.6) (7.1) (20.0) (3.7)
EPS (S cts) 21.5 19.8 15.4 14.8 Key Risks to Our View:
EPS Pre Ex. (S cts) 20.7 19.2 15.4 14.8 Limited uptake of TPG’s services could reduce the threat to mobile
EPS Gth Pre Ex (%) (4) (7) (20) (4) market share. In this scenario, we expect TPG to capture only
Diluted EPS (S cts) 21.5 19.7 15.3 14.7
3.5% of the revenue share from the incumbents over the next 4-5
Net DPS (S cts) 19.9 20.0 16.0 16.0
years, by 2022. Under this bull-case scenario for incumbents, our
BV Per Share (S cts) 10.8 11.3 9.64 8.44
PE (X) 12.9 14.1 18.1 18.8 TP for StarHub is S$2.66.
PE Pre Ex. (X) 13.5 14.5 18.1 18.8 Network sharing may not go through. We currently project a 10%
P/Cash Flow (X) 8.8 8.7 9.9 9.4 capex savings from network sharing from FY18 onwards. If it does
EV/EBITDA (X) 7.5 8.0 9.3 9.8 not go through, our TP for StarHub would be S$2.09.
Net Div Yield (%) 7.2 7.2 5.8 5.8
P/Book Value (X) 25.6 24.6 28.8 32.9 At A Glance
Net Debt/Equity (X) 2.7 3.6 5.3 8.1 Issued Capital (m shrs) 1,729
ROAE (%) 221.2 178.5 146.9 163.7 Mkt. Cap (S$m/US$m) 4,806 / 3,439
Major Shareholders (%)
Earnings Rev (%): (18) (20) Asia Mobile Holdings Pte Ltd 55.9
Consensus EPS (S cts): 16.2 15.4 Nippon Telegraph & Telephone Co 9.9
Other Broker Recs: B: 1 S: 13 H: 8 Blackrock 5.1
Free Float (%) 29.2
Source of all data on this page: Company, DBS Bank, Bloomberg 3m Avg. Daily Val (US$m) 11.6
Finance L.P ICB Industry : Telecommunications / Mobile Telecommunications

ASIAN INSIGHTS VICKERS SECURITIES


ed: TH / sa:YM, PY
Company Guide
StarHub

WHAT’S NEW

10% below estimates due to lack of grants and higher handset subsidies

1Q17 results net debt/EBITDA. After cutting its dividend guidance for
1Q17 net profit of S$73.1m (-21% y-o-y, +35% q-o-q) was FY2017 in February 2017, we think it is less likely that
10% below our estimate. While service revenue declined Starhub would want to cut its guidance again in the short
slightly (-1% y-o-y), the bottom line was hurt more by an term. Hence, we assume that Starhub will borrow another
absence of adoption grant and higher operating expenses. c.S$250m by FY18, due to its projected cash needs for
Other income declined by S$12m versus 1Q16, due to the spectrum rights payment. We project net debt/EBITDA to
absence of adoption grant for fibre broadband as StarHub
move up to 1.9x by FY18.
has fully amortised the grant. Meanwhile, operating expenses
rose by S$13m versus 1Q16 due to (a) an increased mix of
high-end smartphones, coupled with higher volumes, and (b)
higher TV content costs, coupled with higher costs from more Spectrum auctions and new entrant market share
fibre broadband sign-ups. scenarios

Pay TV and broadband subscriber loss is a key concern. Pay What will payment schedule for newly acquired spectrum be
TV subscriber base declined by 11,000 during 1Q17 or ~2% like? We note that previous payments for the 2013 spectrum
of its subscriber base. This brought 12-month subscriber loss auction were due on a lump-sum basis. TPG also paid for its
to 41,000 as customers churned to the cheaper spectrums in the New Entrant Spectrum Auction conducted in
alternatives. Broadband subscriber base also declined, by December 2016 on a lump-sum basis, according to its filing
3,000 during 1Q17 or ~1% of its subscriber base after being with the Australian Securities Exchange. While a conservative
stable for a while. Pay TV revenue declined 7% y-o-y while payment schedule will benefit the incumbents’ cash flows, we
broadband revenue was flat on an annual basis. project lump-sum payment to be on the conservative side.

Mobile business was relatively stable as subscriber gains offset Spectrum payment for 700 MHz spectrum could be delayed.
the ARPU decline. Mobile revenue at S$296m declined 1% y- Prior to the auction, the 700 MHz was initially removed due
o-y. The pre-paid and post-paid customer base grew by to uncertainty over the switch-over date from analogue TV
43,000 and 48,000 y-o-y respectively. Compared to a year transmission to digital. It was subsequently added back. While
ago, both the pre-paid and post-paid ARPUs decreased by analogue broadcasting is due to be phased-out by end-2017,
S$2 to S$15 and S$67 respectively. there may be potential delays. According to the Infocomm
Media Development Authority (IMDA), while the 2G network
Trade-off between leveraging up and sustaining dividends. is due for closure from 1 April 2017, there were reportedly
Against the backdrop of projected declining earnings due to ~100,000 mobile subscribers still registered on 2G network as
competition in the mobile space and structural shifts in the of 31 March 2017. As a result, telcos will only progressively
pay TV business, as well as potential competition from TPG in wind down the 2G network after 1 April. Reportedly, the
shutdown process will be completed by 18 April 2017. There
the broadband space, we believe Starhub has to decide
may be similar delays for the transition from analogue TV
between leveraging up and the possibility of cutting dividends transmission to digital, although the official commencement
as it needs cash for the spectrum rights payment. date for the 700 MHz lots is 1 January 2018. Thus, we believe
that the S$188m spectrum payment may be due only in early
Leveraging up more likely. Starhub has an existing S$1bn
2018, though further clarity from the regulator is awaited.
multi-currency medium-term note programme and it has
issued S$520m in the two years leading up to 31 December
2016, leveraging up from 0.57x net debt/EBITDA in FY14 to
1.02x in FY16, keeping below its comfortable level of 1.5x

ASIAN INSIGHTS VICKERS SECURITIES


Page 2
Company Guide
StarHub

Quarterly / Interim Income Statement (S$m)


FY Dec 1Q2016 4Q2016 1Q2017 % chg yoy % chg qoq

Revenue 591 635 592 0.2 (6.7)


Cost of Goods Sold (420) (504) (499) 18.7 (1.0)
Gross Profit 171 131 93.6 (45.2) (28.6)
Other Oper. (Exp)/Inc (53.1) (62.4) 0.27 nm nm
Operating Profit 118 68.7 93.9 (20.2) 36.6
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 - -
Associates & JV Inc (0.2) (0.2) (0.2) - -
Net Interest (Exp)/Inc (4.7) (6.6) (6.3) (34.0) 4.5
Exceptional Gain/(Loss) 0.0 0.0 0.0 - -
Pre-tax Profit 113 61.9 87.4 (22.5) 41.1
Tax (19.9) (7.9) (14.3) (28.1) 81.0
Minority Interest 0.0 0.0 0.0 - -
Net Profit 92.8 54.0 73.1 (21.3) 35.3
Net profit bef Except. 92.8 54.0 73.1 (21.3) 35.3
EBITDA 183 136 160 (12.4) 18.4
Margins (%)
Gross Margins 28.9 20.7 15.8
Opg Profit Margins 19.9 10.8 15.8
Net Profit Margins 15.7 8.5 12.3

Source of all data: Company, DBS Bank

ASIAN INSIGHTS VICKERS SECURITIES


Page 3
Company Guide
StarHub

Mobile EBITDA Margins


CRITICAL DATA POINTS TO WATCH
36.3
36.7
33.8 33.2
Earnings Drivers: 31.4 28.9 28.8

Mobile business to perform better than its local peer M1. 26.2

StarHub has a lower reliance on mobile revenue (~50% in 1Q17 21.0

vs. ~70% for M1) and a stickier, less price-sensitive customer 15.7

base. StarHub has also introduced more fixed-mobile bundling 10.5

offers to reduce revenue share loss to a new entrant. As a 5.2


result, we expect StarHub to be less affected by the entry of a 0.0
2014A 2015A 2016A 2017F 2018F
fourth player compared to its local peer M1. We expect
StarHub’s revenue share to drop from 30% in 2015 to 28% by CATV & Broadband EBITDA Margins
2022. As a result of lower revenues, higher operating costs and
18.8 18.4 18 18 17.9 17.9
higher interest expenses, we expect group earnings to drop by
20% from 2016’s level by 2022. 15.0

11.3
Enterprise Fixed business (~17% of service revenue) continues
to grow. This segment, encompassing managed services, cloud 7.5

and other enterprise services, is seeing encouraging growth.


3.8
Management is intent on developing the segment as an
alternative revenue generator to the traditional telco business 0.0
2014A 2015A 2016A 2017F 2018F
and is likely to maintain investments in the segment. The
segment also offers superior margins compared to the other Fixed Network EBITDA Margins
segments, and thus could provide better support to bottom-line 36.8 36.8 36.6 36.5 36.5
37.54
performance.
30.03

Stabilising Fixed Broadband business (~9% of service revenue) is


22.52
positive. Broadband revenue is showing encouraging signs of
recovery with improvements in average revenue per user (ARPU) 15.01

and subscribers. Though ARPU is still 20%+ below FY12 levels,


7.51
it has improved ~12% since 1Q15. The recovery in broadband
revenue and ARPU will provide much needed support for 0.00
2014A 2015A 2016A 2017F 2018F
StarHub’s top line, with broadband currently contributing c.9%
of service revenue.

Pay TV business (~17% of service revenue) faces threat in the


near term but can maintain its presence. Netflix entered the Source: Company, DBS Bank
Singapore market in early 2016. StarHub saw its pay TV
subscribers drop 7% in FY16. Netflix has a price tag of S$11
per month, at a c.60% discount to Starhub’s entry level of
S$27. However, Netflix does not offer comprehensive local
language and sports content, which is a key driver in the
Singapore pay TV market. Moreover, we note that Starhub has
a strong foothold in the hospitality sector with its pay TV
offerings which will, to an extent, help it offset pressure in the
pay TV market.

ASIAN INSIGHTS VICKERS SECURITIES


Page 4
Company Guide
StarHub

Leverage & Asset Turnover (x)


Balance Sheet: 1.3
8.00
Balance sheet will need to be managed carefully. StarHub raised 1.3
7.00
S$300m through medium-term notes in 2Q16. We assume 6.00
1.2
another c.S$250m borrowings by FY18 to fund spectrum 5.00
acquisitions. While this will stretch its balance sheet in the near 4.00
1.2

term, potential capex savings from network sharing agreement 3.00 1.1
signed earlier with M1 will help to shore up cash flows in the 2.00
1.1
medium term. We thus believe dividend payouts can be 1.00

sustained at the lower normal of 16 Scts per year in the 0.00


2014A 2015A 2016A 2017F 2018F
1.0

foreseeable future, albeit with some support from higher Gross Debt to Equity (LHS) Asset Turnover (RHS)

leverage.
Capital Expenditure
S$m
Share Price Drivers: 600.0

Grant income and cost increases impact near-term profitability. 500.0

We have revised down our FY17/FY18 earnings due to lower 400.0

adoption grants, cost escalations, and higher interest expenses. 300.0

As a result, we have reduced our DCF-based TP for StarHub 200.0


from S$2.85 earlier to S$2.33. 100.0

0.0
Better-than-expected free cash flows in the medium term due 2014A 2015A 2016A 2017F 2018F

to network sharing. We believe StarHub will be able to reduce Capital Expenditure (-)

capex by 10% from FY18 onwards from the current projected ROE (%)
levels if the network sharing agreement with M1 takes hold. If
capex savings are higher than expected, StarHub’s TP could 250.0%

improve to S$2.58, in our view. 200.0%

StarHub Capex savings vs Share price 150.0%

Capex saving 0% 10% 20% 100.0%


StarHub TP (S$) 2.09 2.33 2.58
50.0%

Source: DBS Bank 0.0%


2014A 2015A 2016A 2017F 2018F

Key Risks: Forward PE Band (x)


Limited uptake of TPG’s services could reduce the threat to 25.6
(x)
mobile market share. As an inexperienced operator, TPG could
struggle to deploy and maintain a network that could 23.6

challenge the network quality of the incumbents. Further, as +2sd: 21.9x


21.6
the company has limited bundling capabilities, incumbents may +1sd: 20.8x
be able to limit their revenue share losses. In this bull-case 19.6 Avg: 19.7x

scenario for incumbents, we expect TPG to capture only 3.5% -1sd: 18.5x
17.6 -2sd: 17.4x
of the revenue share from the incumbents. Under this scenario,
our TP is S$2.66 for StarHub. 15.6
May-13 May-14 May-15 May-16 May-17

Network sharing may not go through. We currently project a PB Band (x)


10% capex savings from network sharing from FY18 onwards. (x)
127.2
If it does not go through, our TP for StarHub would be S$2.09.
107.2

87.2 +2sd: 87.87x

Company Background 67.2 +1sd: 67.9x


StarHub is the second largest of the three telecom operators in
47.2 Avg: 47.94x
Singapore. The company provides mobile services, pay TV,
27.2 -1sd: 27.97x
fixed broadband and fixed voice services, popularly known as
quadruple play services. 7.2 -2sd: 8x
May-13 May-14 May-15 May-16 May-17

Source: Company, DBS Bank

ASIAN INSIGHTS VICKERS SECURITIES


Page 5
Company Guide
StarHub

Key Assumptions
FY Dec 2014A 2015A 2016A 2017F 2018F
Mobile EBITDA Margins 36.3 33.8 33.2 28.9 28.9
CATV & Broadband 18.4 18.0 18.0 17.9 17.9
Fixed Network EBITDA 36.8 36.8 36.6 36.5 36.5

Segmental Breakdown
FY Dec 2014A 2015A 2016A 2017F 2018F
Revenues (S$m)
Mobile 1,248 1,240 1,215 1,208 1,186 Enterprise revenues to
Cable TV & Broadband 592 591 595 585 569 drive growth
Fixed Network 378 385 400 428 458
Equipment sale 170 228 188 176 163

Total 2,387 2,444 2,397 2,397 2,375


EBITDA (S$m)
Mobile 453 419 403 349 342
Cable TV & Broadband 109 106 107 105 102
Fixed Network 139 142 146 156 167
Equipment sale 46.6 45.6 32.2 0.30 0.0

Total 748 713 689 610 611


EBITDA Margins (%)
Mobile 36.3 33.8 33.2 28.9 28.8
Cable TV & Broadband 18.4 18.0 18.0 17.9 17.9
Fixed Network 36.8 36.8 36.6 36.5 36.5
Equipment sale 27.5 20.0 17.2 0.2 0.0

Total 31.3 29.2 28.7 25.4 25.7

Income Statement (S$m)


FY Dec 2014A 2015A 2016A 2017F 2018F
Revenue 2,387 2,444 2,397 2,397 2,375
Cost of Goods Sold (1,957) (2,049) (2,004) (2,050) (2,033)
Gross Profit 430 396 393 347 342
Other Opng (Exp)/Inc 46.6 45.6 32.2 0.30 0.0
Operating Profit 477 441 425 347 342 Lower grant income to
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 impact profitability
Associates & JV Inc 0.0 (0.3) (1.6) (1.6) (1.6)
Net Interest (Exp)/Inc (20.6) (15.8) (22.7) (26.6) (33.2)
Exceptional Gain/(Loss) 0.0 15.0 9.50 0.0 0.0
Pre-tax Profit 456 440 410 319 307
Tax (85.6) (67.9) (68.9) (53.6) (51.6)
Minority Interest 0.0 0.0 0.0 0.0 0.0
Preference Dividend 0.0 0.0 0.0 0.0 0.0
Net Profit 371 372 341 266 256
Net Profit before Except. 371 357 332 266 256
EBITDA 748 712 689 610 611
Growth
Revenue Gth (%) 0.7 2.4 (1.9) 0.0 (0.9)
EBITDA Gth (%) 0.7 (4.7) (3.4) (11.4) 0.2
Opg Profit Gth (%) 0.7 (7.4) (3.7) (18.3) (1.5)
Net Profit Gth (Pre-ex) (%) (2.4) (3.6) (7.1) (20.0) (3.7)
Margins & Ratio
Gross Margins (%) 18.0 16.2 16.4 14.5 14.4
Opg Profit Margin (%) 20.0 18.1 17.7 14.5 14.4
Net Profit Margin (%) 15.5 15.2 14.2 11.1 10.8
ROAE (%) 285.4 221.2 178.5 146.9 163.7
ROA (%) 19.1 19.1 16.6 12.3 11.4
ROCE (%) 39.3 37.1 29.9 21.8 20.1
Div Payout Ratio (%) 93.1 92.4 101.4 104.1 108.1
Net Interest Cover (x) 23.1 27.9 18.7 13.1 10.3
Source: Company, DBS Bank

ASIAN INSIGHTS VICKERS SECURITIES


Page 6
Company Guide
StarHub

Quarterly / Interim Income Statement (S$m)


FY Dec 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017

Revenue 591 586 585 635 592


Cost of Goods Sold (420) (402) (413) (504) (499)
Gross Profit 171 184 172 131 93.6
Other Oper. (Exp)/Inc (53.1) (58.0) (59.3) (62.4) 0.27
Operating Profit 118 126 113 68.7 93.9
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0
Associates & JV Inc (0.2) (0.3) (0.9) (0.2) (0.2)
Net Interest (Exp)/Inc (4.7) (5.1) (6.3) (6.6) (6.3)
Exceptional Gain/(Loss) 0.0 9.50 0.0 0.0 0.0 Higher handset subsidies and
Pre-tax Profit 113 130 106 61.9 87.4 lower grant income
Tax (19.9) (21.6) (19.5) (7.9) (14.3)
Minority Interest 0.0 0.0 0.0 0.0 0.0
Net Profit 92.8 109 86.0 54.0 73.1
Net profit bef Except. 92.8 99.1 86.0 54.0 73.1
EBITDA 183 192 178 136 160

Growth
Revenue Gth (%) (6.8) (0.9) (0.1) 8.5 (6.7)
EBITDA Gth (%) 16.7 4.7 (7.0) (24.0) 18.4
Opg Profit Gth (%) 28.0 7.2 (10.6) (39.0) 36.6
Net Profit Gth (Pre-ex) (%) 14.9 6.8 (13.2) (37.2) 35.3
Margins
Gross Margins (%) 28.9 31.4 29.4 20.7 15.8
Opg Profit Margins (%) 19.9 21.5 19.3 10.8 15.8
Net Profit Margins (%) 15.7 18.5 14.7 8.5 12.3

Balance Sheet (S$m)


FY Dec 2014A 2015A 2016A 2017F 2018F

Net Fixed Assets 911 890 918 997 1,030


Invts in Associates & JVs 0.0 27.5 25.9 24.3 22.7
Other LT Assets 405 388 511 546 791
Cash & ST Invts 264 173 285 109 55.7
Inventory 42.4 54.3 49.6 49.6 49.2
Debtors 162 153 172 172 171
Other Current Assets 203 223 234 234 234
Total Assets 1,987 1,909 2,196 2,133 2,354

ST Debt 200 138 10.0 10.0 10.0 Expects Starhub to


Creditor 796 687 708 708 702 raise more debt
Other Current Liab 197 203 138 121 119
LT Debt 488 550 978 978 1,228
Other LT Liabilities 158 144 168 150 150
Shareholder’s Equity 149 188 195 167 146
Minority Interests 0.0 0.0 0.0 0.0 0.0
Total Cap. & Liab. 1,987 1,909 2,196 2,133 2,354

Non-Cash Wkg. Capital (586) (460) (390) (373) (366)


Net Cash/(Debt) (423) (514) (702) (878) (1,182)
Debtors Turn (avg days) 24.3 23.5 24.8 26.2 26.3
Creditors Turn (avg days) 167.7 152.3 146.4 144.7 145.9
Inventory Turn (avg days) 9.3 9.9 10.9 10.1 10.2
Asset Turnover (x) 1.2 1.3 1.2 1.1 1.1
Current Ratio (x) 0.6 0.6 0.9 0.7 0.6
Quick Ratio (x) 0.4 0.3 0.5 0.3 0.3
Net Debt/Equity (X) 2.8 2.7 3.6 5.3 8.1
Net Debt/Equity ex MI (X) 2.8 2.7 3.6 5.3 8.1
Capex to Debt (%) 46.8 47.6 37.1 38.3 44.3
Z-Score (X) 3.1 3.4 3.0 3.1 3.1
Source: Company, DBS Bank

ASIAN INSIGHTS VICKERS SECURITIES


Page 7
Company Guide
StarHub

Cash Flow Statement (S$m)


FY Dec 2014A 2015A 2016A 2017F 2018F

Pre-Tax Profit 456 440 410 319 307


Dep. & Amort. 271 271 265 264 271
Tax Paid (65.3) (92.7) (53.7) (70.5) (53.6)
Assoc. & JV Inc/(loss) 0.0 0.30 1.60 1.60 1.60
Chg in Wkg.Cap. 35.2 (108) (60.2) 0.07 (4.4)
Other Operating CF (42.3) 33.5 (12.3) (28.4) (10.0)
Net Operating CF 655 545 551 486 511
Capital Exp.(net) (322) (327) (366) (378) (549)
Other Invts.(net) 0.0 0.0 (18.0) 0.0 0.0
Invts in Assoc. & JV 0.0 (12.0) 0.0 0.0 0.0 Expect lump-sum
Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0 spectrum payments in
Other Investing CF 2.80 38.9 (5.4) 0.0 0.0 2018
Net Investing CF (319) (300) (389) (378) (549)
Div Paid (345) (346) (346) (294) (276)
Chg in Gross Debt 0.0 0.0 300 0.0 250
Capital Issues 0.0 0.0 (12.3) 0.0 0.0
Other Financing CF 6.20 10.6 8.90 10.0 10.0
Net Financing CF (339) (335) (49.6) (284) (16.4)
Currency Adjustments 0.20 0.30 0.0 0.0 0.0
Chg in Cash (2.7) (90.8) 112 (176) (53.7)
Opg CFPS (S cts) 35.9 37.7 35.4 28.1 29.9
Free CFPS (S cts) 19.3 12.6 10.7 6.25 (2.2)
Source: Company, DBS Bank

Target Price & Ratings History

S$
4.01 3 12- mt h
Dat e of Closing
S.No. T arget Rat ing
Report Price
3.81
4 Price
1: 06 May 16 3.32 3.30 FULLY V ALUED
3.61 2: 16 May 16 3.39 3.30 HOLD
3: 04 Aug 16 3.92 4.10 BUY
2 6
3.41 4: 22 Aug 16 3.75 3.65 HOLD
8
5: 21 Sep 16 3.40 3.00 FULLY V ALUED
5 7
3.21 1 6: 26 Sep 16 3.39 3.00 FULLY V ALUED
12 7: 02 Nov 16 3.38 2.80 FULLY V ALUED
9
3.01 8: 03 Nov 16 3.27 2.80 FULLY V ALUED
14
10 11 9: 17 Nov 16 2.96 2.80 FULLY V ALUED
2.81 10: 15 Dec 16 2.81 2.65 FULLY V ALUED
13 11: 13 Jan 17 3.03 3.01 HOLD
2.61 12: 16 Jan 17 3.01 3.01 HOLD
May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 13: 06 Feb 17 2.80 2.85 HOLD
14: 05 Apr 17 2.86 2.85 HOLD
Not e : Share price and Target price are adjusted for corporate actions.

Source: DBS Bank


Analyst: Sachin MITTAL
Singapore Research Team
Suvro SARKAR

ASIAN INSIGHTS VICKERS SECURITIES


Page 8
Company Guide
StarHub

DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends

Completed Date: 4 May 2017 08:09:09 (SGT)


Dissemination Date: 4 May 2017 09:02:20 (SGT)

GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated
corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii)
redistributed without the prior written consent of DBS Bank Ltd.

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS
Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively,
the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other
factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or
warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without
notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific
investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees
only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial
advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit)
arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not
to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons
associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have
positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and
other banking services for these companies.

Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can
be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments.
The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may
not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to
update the information in this report.

This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned
schedule or frequency for updating research publication relating to any issuer.

The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and
assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on
which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual
results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED
UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:

(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk
assessments stated therein.

Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)
mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the
commodity referred to in this report.

ASIAN INSIGHTS VICKERS SECURITIES


Page 9
Company Guide
StarHub

DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public
offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage
in market-making.

ANALYST CERTIFICATION
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the
companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her
compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s)
primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate 1 does not serve as an officer of the
issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real
estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the
management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or
his associate does not have financial interests 2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has
procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of
research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment
banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment
banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the
DBS Group.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES


1. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates have a proprietary position in
StarHub, M1 recommended in this report as of 31 Mar 2017.
2. Neither DBS Bank Ltd, DBS HK nor DBSV HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research
Report.
3. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates have a net long position
exceeding 0.5% of the total issued share capital in StarHub, M1 recommended in this report as of 31 Mar 2017.

Compensation for investment banking services:


4. DBS Bank Ltd, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months for
investment banking services from StarHub as of 31 Mar 2017.
5. DBS Bank Ltd, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have managed or co-managed a public offering of securities for
StarHub in the past 12 months, as of 31 Mar 2017.
6. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a
manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further
information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document
should contact DBSVUSA exclusively.

Directorship/trustee interests:
7. Nihal Vijaya Devadas Kaviratne CBE, a member of DBS Group Holdings Board of Directors, is a Director of Starhub as of 31 Mar 2017.

Disclosure of previous investment recommendation produced:


8. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other
investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12
months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by
DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.

1
An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of
which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person
accustomed or obliged to act in accordance with the directions or instructions of the analyst.
2
Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a
new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term
does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new
listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

ASIAN INSIGHTS VICKERS SECURITIES


Page 10
Company Guide
StarHub

RESTRICTIONS ON DISTRIBUTION
General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or
located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be
contrary to law or regulation.

Australia This report is being distributed in Australia by DBS Bank Ltd. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd
(“DBSVS”), both of which are exempted from the requirement to hold an Australian Financial Services Licence under the
Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated
by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws. Distribution of this
report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong This report has been prepared by a person(s) who is not licensed by the Hong Kong Securities and Futures Commission to
carry on the regulated activity of advising on securities in Hong Kong pursuant to the Securities and Futures Ordinance
(Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Vickers
Hong Kong Limited, a licensed corporation licensed by the Hong Kong Securities and Futures Commission to carry on the
regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of
Hong Kong).

For any query regarding the materials herein, please contact Paul Yong (CE. No. ASE988) at equityresearch@dbs.com.

Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.

Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from
ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this
report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised
that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected
and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any
of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek
to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also
have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and
other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No.
198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the
Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign
entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial
Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert
Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons
only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from,
or in connection with the report.

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are only
intended for institutional clients only and no other person may act upon it.

ASIAN INSIGHTS VICKERS SECURITIES


Page 11
Company Guide
StarHub

United This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore.
Kingdom
This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised
and regulated by the Financial Conduct Authority in the United Kingdom.

In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and
associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any
form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at
persons having professional experience in matters relating to investments. Any investment activity following from this
communication will only be engaged in with such persons. Persons who do not have professional experience in matters
relating to investments should not rely on this communication.

Dubai This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3rd Floor,
Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank
Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for
professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

United States This report was prepared by DBS Bank Ltd. DBSVUSA did not participate in its preparation. The research analyst(s) named
on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research
analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company,
public appearances and trading securities held by a research analyst. This report is being distributed in the United States by
DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional
Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may
authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should
contact DBSVUSA directly and not its affiliate.

Other In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified,
jurisdictions professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

DBS Bank Ltd


12 Marina Boulevard, Marina Bay Financial Centre Tower 3
Singapore 018982
Tel. 65-6878 8888
e-mail: equityresearch@dbs.com
Company Regn. No. 196800306E

ASIAN INSIGHTS VICKERS SECURITIES


Page 12

You might also like