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StarHub Ltd - Current dividends are not sustainable

Shared By Stock Fanatic on Saturday, July 14, 2018 | 14.7.18

StarHub's stock price has corrected by c.56% since Jan-2015 due to increasing competition and the concerns surrounding the entry of TPG. We see further downside in StarHub's stock price as we believe it is not yet fully baking in the financial impact from the entry of TPG. Read More

We expect the company's consolidated service revenue to decline at a three-year CAGR of 2.0% led by 5.9% decline in mobile service revenue and 8.8% in pay TV revenue. Given the top-line weakness, we expect consolidated EBITDA and net profit to decline at a three-year CAGR of 6.6% and 19.5%, respectively.

We do not think StarHub can sustain paying an annual dividend of S¢16.0/sh given the expected rise in mobile competition and structural headwinds in the pay TV business. Hence, we reduce our annual dividend forecast to S¢10.0/sh from 2019E onward.

Technical Analysis
Daily Chart
We cut our 2018E-20E earnings estimates by 3-21% as we lower our mobile service revenue and pay TV forecasts. As a result, our TP reduces to S$1.45 (from S$2.00). Maintain UNDERPERFORM.

Source : Credit Suisse Asia Pacific Equity Research
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Posted on Saturday, July 14, 2018 | 14.7.18
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