Starhub
Amidst the dynamic landscape of telecommunications, StarHub stands as a beacon of promise and opportunity for investors seeking both growth potential and value.
As the company nears the end of its Dare+ investment cycle, marked by targeted investments of SGD80 million in 2024, a new era of profitability and efficiency beckons.
“We upgrade Starhub to BUY from HOLD and raise our TP to SGD1.44. Starhub is at the tail-end of its Dare+ investment cycle and its capex levels should drop while legacy costs are eliminated, in our view.
“We estimate earnings CAGR of 10% over 2023-26E while FCF per share should increase from SGD6.4 cents in 2023 to SGD13.8 cents in 2026. Maybank EBITDA and earnings estimates are 2-6% ahead of the street for 2024-26E,” Maybank says in its report on the telco.
With the Dare+ cycle coming to a close, StarHub anticipates a significant drop in capital expenditure (capex) levels while simultaneously eliminating legacy costs. This strategic shift positions the company for enhanced earnings and free cash flow (FCF) generation, with projected FCF per share expected to surge from SGD6.4 cents in 2023 to SGD13.8 cents in 2026.
Moreover, StarHub’s dividend yield of 6% stands at the upper echelon of its ASEAN telecom peers, underscoring its commitment to rewarding shareholders.
The company’s potential for further growth is underscored by the prospect of industry consolidation, a move that could be spearheaded by StarHub itself. In a crowded Singapore mobile market, characterized by intense competition and declining prices, consolidation presents an avenue for synergies and cost savings.
With a robust balance sheet and cross-selling opportunities, StarHub is well-positioned to drive consolidation, potentially leading to significant earnings accretion in the coming years.
From a valuation standpoint, the telco presents compelling metrics, trading at significant discounts to its ASEAN peers on both price-to-earnings (PE) and enterprise value-to-EBITDA (EV/EBITDA) ratios.
This deep value proposition, coupled with the company’s strong fundamentals and growth prospects, makes the company an attractive investment opportunity for discerning investors looking to capitalize on the convergence of growth and value in the telecommunications sector.
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