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this is really a low beta stock..should i ditch this and buy M1? LOL..
hmm...WHO is playing this 1 lot game again har ?!??! SI BEH bo liao ! :P
| DAY LOW : 2.110 | LAST DONE : 2.110 | VOLUME : 1,903 |
| Time | Last | Vol | Buy/Sell |
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| 11:23:16 | 2.120 | 1 | S |
| 11:23:13 | 2.110 | 1 | B |
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| 11:22:48 | 2.110 | 1 | B |
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| 11:18:38 | 2.120 | 10 | S |
| 11:18:36 | 2.110 | 1 | B |
| 11:18:11 | 2.110 | 1 | B |
KIMPEK ( Date: 20-Jul-2009 17:33) Posted:
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Quite disappointed with this counter,, once it break even(2.23) will sell it off...
By CIMB dated 15 July 2009
P/S - sorry , some data like not in alignment. I think due to the programme whereby when we copy and paste, it will go out of alignment.
•
sector revenue growth of 3% and sector EBITDA to be relatively flat on a qoq basis.
Specifically, we see revenues being relatively lifeless owing to stagnating usage
patterns and weakness in roaming, IDD and migrant worker usage. The
compensating factor, however, would be the growth in data services. Cost
containment, while an ever-present theme, will face resistance from normalising
subscriber acquisition and retention cost (SAC) after a seasonally low 1Q09. Key
themes to watch out for are a) normalising SACs, b) weak toplines, c) market share
trends, d) cost containment and e) skirmishes in broadband.
No surprises expected. We anticipate a fairly uninspiring 2Q where we project•
their success in curbing, if not improving, their market share erosion which has now
descended near their internal threshold. Thus, we anticipate revenue to decline by
1-2% for 2Q exacerbated by slower roaming, and weaker mobile usage among the
migrant worker segment. We project EBITDA margin declines of 0.5-1% pts on a
qoq basis leading to a net profit contraction of 9-10% sequentially. For StarHub, we
see 2Q revenue declining by a smaller 1-2% relative to 1Q. We think that there
could be multi-faceted threats to topline from its discretionary base which is
arguably more vulnerable to an economic slowdown. In terms of margins, we
believe that there could be some slight pressure on margins owing to promotion
campaigns and potential down trading. Thus, we believe that EBITDA margins
would trend downwards slightly by close to 1% pts leading to net profit contraction
of 5-7% qoq decline. SingTel Singapore should see a 4% qoq revenue rebound in
2Q09, on the back of wireless and wired broadband revenue. EBITDA margins
should fall from the seasonally high 1Q09 of 37.6% to 36% in 2Q as subscriber
acquisition and retention costs rise from its seasonal low.
Expectations for operators. For M1, we think the key event would centre around•
market, we believe that telcos will not outperform the market. Hence, we advise
investors to switch out of telcos into high beta cyclicals and reiterate our Neutral
stance on the sector. That said, dividend yields are a prime downside supporter with
average yields of 4-9% for CY09.
Maintain NEUTRAL on the sector. Given our more optimistic outlook on the stock•
earnings turnaround, exposure to emerging markets and the strengthening regional
currencies. We maintain our OUTPERFORM rating on the stock with a SOP-based
target price of S$3.20. Potential re-rating catalysts include qoq earnings growth
driven by the strong performances of its key associates. We advocate switching out
of StarHub (Underperform, Target price: S$1.54) into SingTel as we believe its
share price will come under pressure when bidding for rights to broadcast the
Barclays Premier League begins in 3Q09.
Top pick is SingTel. Our top pick in the sector continues to be SingTel for itsSector comparisons
Target Core 3-yr EPS P/BV ROE Div
Bloomberg Price price Mkt cap P/E
(x) CAGR (x) (%) yield (%)ticker Recom.
(Local) (Local) (US$ m) CY2009 CY2010 (%) CY2009 CY2009 CY2009SingTel ST SP O 3.16 3.20 34,472 13.5 12.2 8.8 2.3 17.4 4.0
M1 M1 SP N 1.59 1.54 975 9.7 8.9 1.6 5.7 61.8 8.7
StarHub STH SP U 2.16 1.58 2,533 11.4 13.8 1.4 26.8 263.1 8.3
Simple average 11.5 11.6 3.9 11.6 114.1 7.0
O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy and TS = Trading Sell
Source: Company, CIMB-GK Research
[ 2 ]
2Q09 earnings preview
Our expectations for 2Q.
sector revenue growth of 3% and sector EBITDA to be relatively flat on a qoq basis.
Specifically, we see revenues being relatively lifeless owing to stagnating usage
patterns and weakness in pressure points of roaming and IDD. The compensating
factor, however, would be the growth in data services. Cost containment, while an
ever-present theme, will face resistance from normalising subscriber acquisition and
retention cost (SAC) after a seasonally low 1Q09.
Key themes to watch out for in 2Q are: a) normalising SACs, b) weak toplines, c)
market share trends, d) cost containment and e) skirmishes in broadband.
We anticipate a fairly uninspiring 2Q where we projectMore normalised SACs.
abnormally low SACs post-MNP and b) the strategic initiatives by the respective
operators.
We see SACs normalising for two primary factors: i) theAbnormally low SACs
when SACs ballooned to unsustainably high levels, see Fig 1, which consequently
pushed margins down (Fig 2) to the region of 35-36% from 37-40% mark before. In
response, operators dialled back too aggressively, and in 1QCY09 signalled their
intentions of raising their SACs to more sustainable levels and as a tool for subscriber
acquisition.
– We believe that there was an overreaction to the MNP periodDifferent strategic initiatives
on preserving its market share, after seeing it dwindle down to its internal threshold of
a 25% market share. As a result, we have seen heavier handset subsidies on offer by
M1. Meanwhile, SingTel has been equally pugnacious, as it was armed with a fresh
marketing budget for FY3/10 having recently concluded its financial year end in Mar.
On the other hand, we understand that StarHub was less combative but did offer its
fair share of handset subsidies in 2Q.
– In its 1Q conference call, M1 signalled that it was intentFigure 1: SACs (S$)
0
50
100
150
200
250
300
350
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
SingTel StarHub M1
Source: Company, CIMB-GK Research
Figure 2: Sector EBITDA margins (%)
30.0%
32.0%
34.0%
36.0%
38.0%
40.0%
42.0%
44.0%
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09
Source: Company, CIMB-GK Research
[ 3 ]
Cost containment.
resistance from normalising SACs levels. However, we believe that most of the
operators have factored this into their guidance for FY09. To recap, SingTel
Singapore is guiding for EBITDA margins to decline to the 36-38% for FY3/10 from
37.3% in FY09. StarHub upped its service EBITDA margin guidance to 32% (from its
earlier guidance of 31%) for FY09 vs 31.7% in FY08. M1 believes that operations will
remain stable in FY09.
While the emphasis on cost containment remains, it will faceWeak toplines.
usage patterns and lower roaming and IDD usage, which leads us to believe that 2Q
revenues may be fairly pedestrian. We anticipate that sector revenues would grow in
the order of 3% on a qoq basis. That said, there should be some support from nonvoice
services especially in wired and wireless broadband, an area where all telcos
have been actively pinpointing to stave off weakness in their bread-and-butter voice
services. We believe that in 1Q09, wireless broadband made up about 5% of
StarHub’s total revenue, 8% to M1’s total revenue and 3% to SingTel’s revenue.
The economy continues to wreak havoc on toplines causing stagnantHow will market share shift?
of the three operators. M1 has already trumpeted its plans on defending its market
share having seen it descend to its internal threshold of 25% (Fig 3). However, they
stand at a disadvantage vis-ŕ-vis their two larger rivals given their single product focus
and inability to offer bundling options.
But the overriding theme in the jostling for market share is the game-changing
NGNBN where competition and new players would be introduced. Unsurprisingly, we
believe that operators are keen to lockdown their higher-value subscribers and poach
other subscribers before this new paradigm emerges. As a consequence, we have
seen more aggressive handset subsidies, more attractive bundling promotions and
various initiatives on the broadband front.
A keen area of focus will be the shifting market sharesSkirmishes in broadband.
skirmishes in broadband, more on the wired broadband variety. We believe this
supports our thesis that retail broadband pricing is bound to come under pressure
ahead of the NGNBN rollout. We also think that operators are looking to tap into the
pent-up demand for wireless broadband given the proliferation of smartphones and
notebooks and the fairly mobile society present in Singapore. Some of the key prepaid
wireless broadband and other broadband initiatives launched in 2Q are:
Throughout the quarter, there had been rather aggressive•
usage for a period of 3-days for S$18 at speeds of up to 7.2 Mbps. On the fixed
broadband side, M1 provided heavier discounts for its 15 Mbps, 30 Mbps and 100
Mbps plan.
In Apr, M1 launched Singapore’s first wireless broadband product, offering unlimited•
variant, offering speeds of either 2 Mbps or 7.2 Mbps. It offered various rates
including an hourly rate, a daily rate, a 3-day rate, and a five-day rate.
StarHub then followed up in May by offering its own prepaid wireless broadband•
dropped the 8 Mbps plan in favour for a 6 Mbps one at slightly lower cost and
introduced a new higher end 15 Mbps plan.
For SingTel, it raised its pricing for its fixed broadband product on the 3 Mbps plan,Figure 3: Subscriber market share (%)
20%
25%
30%
35%
40%
45%
50%
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09
SingTel StarHub M1
Source: Company, CIMB-GK Research
[ 4 ]
Preview of the operator’s 2Q performance
M1.
not improving, their market share erosion which has now descended near their
internal threshold. Concomitantly, being a mobile-centric player, the loss in
subscribers has a more direct impact to top line. Therefore, we anticipate that revenue
would contract by 1-2% qoq for 2Q, exacerbated by slower roaming and mobile
usage. However, there should be some alleviation stemming from moves to contain
market share loss and focus on non-voice services. Meanwhile, we believe that
EBITDA margins could take a slight hit, owing to more intensive subscriber acquisition
efforts. We project EBITDA margin declines of 0.5-1% pts leading to a net profit
contraction of 9-10% on a qoq basis.
For M1, we think the key event would centre around their success in curbing, ifStarHub.
to 1Q. We think that there could be multi-faceted threats to topline from its
discretionary base which is arguably more vulnerable to an economic slowdown and
its relatively less intense marketing campaigns. In terms of margins, we believe that
there could be some slight pressure on margins owing to promotion campaigns and
potential down trading. Hence, we believe that EBITDA margins would trend
downwards slightly by close to 1% pts leading to net profit contraction of 5-7% on a
qoq basis.
In StarHub’s case, we see 2Q revenue declining by a smaller 1-2% relativeSingTel Singapore
2Q09, on the back of wireless and wired broadband revenue. EBITDA margins should
fall from the seasonally high 1Q09 of 37.6% to 36% in 2Q as subscriber acquisition
and retention costs rise. Also, increasing contributions from SCS’s lower-margin IT
revenue should also dilute margins.
We will preview SingTel’s results separately.
. SingTel Singapore should see a 4% qoq revenue rebound inFigure 4: 2QCY08 estimates for StarHub and M1
2QCY09
Projections
(S$m)
1QCY09
actual (S$m)
qoq
growth
(%)
2QCY08
actual
(S$m)
yoy
growth (%)
Revenue
StarHub 525 531 -1.1% 531 -1.1%
M1 185 186 -1.0% 205 -10.1%
EBITDA
StarHub 163 168 -3.0% 147 10.9%
M1 75 76 -2.1% 77 -2.5%
EBITDA margins (%)
StarHub 31.0% 31.6% 27.7%
M1 40.5% 40.9% 37.3%
Core net profit
StarHub 78 82 -4.9% 64 21.9%
M1 33 36 -8.8% 34 -3.5%
Source: Company, CIMB-GK Research,
Valuation and recommendation
Maintain Neutral on the sector.
market, we believe that telcos will not outperform the market. Hence, we advise
investors to switch out of telcos into high beta cyclicals and reiterate our Neutral
stance on the sector. That said, dividend yields are a prime downside supporter with
average yields of 4-9% for CY09.
Given our more optimistic outlook on the stockSingTel is our top pick.
earnings turnaround and exposure to emerging markets. We maintain our
OUTPERFORM rating on the stock with a SOP-based target price of S$3.20. Potential
re-rating catalysts include qoq earnings growth driven by the strong performances of
its key associates.
Our top pick in the sector continues to be SingTel for itsSwitch out of StarHub to SingTel.
price: S$1.54) into SingTel as we believe its share price will come under pressure
when bidding for rights to broadcast the 2010-12 seasons of the Barclays Premier
League begins in 3Q09
niuyear ( Date: 16-Jul-2009 16:48) Posted:
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Hope you got it?
Can you just type/search under The Society of Remisiers (Singapore) ? Then go to the Research
niuyear ( Date: 16-Jul-2009 16:39) Posted:
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I wanted to copy and paste here the report but it is way too long.
Plse view it at www.remisers.org. Though it always comes in the afternoon, but, sometime, read it as a guide. :)
That is a attractive price. So the down is due to analyst downgrade. Anyway all defensive stock did not perform...basically yesterday. I thk even today also.
Btw will be interesting to see how Starhub progress. Looking at the chart, the uptrend progress for it currently still looks possible. Monitor for a while first.... see if there is any changes in the signal.
Analyst news sometime is really an impact...haha
niuyear ( Date: 16-Jul-2009 16:10) Posted:
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Star hub has been down graded to 1.54. !!
It wld be a gd buy if at this price.
Bc starhub is a defensive stock. All defensive stock are not performing well. Lots of people are drawing out of Defensive stock & go forward for those that can rally up faster (since singapore announce they are out of recession or bc economy are more brighter).
(my opinion)
Why tis counter is down, when all other counter all up, just because of change of CEO????
got in a few days back. starhub is about to release the financial results in august. probably going to get 4.5cents dividend (probably same dividend policy of 4.5 cents per quarter which is about 8% annual dividend yield) when results are released. :D
ocbc investment research gave it a buy rating in May (fair value of S$2.88) . here's the link.
http://www.ocbcresearch.com/Article.aspx?type=research&id=20090508103138_10995