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What You Need To Know About The Latest Quarterly Results From StarHub Ltd.

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StarHub Ltd. (SGX: CC3), which released its second quarter results yesterday, saw single digit declines in both its top- and bottom-line. As one of the tree major telecommunications operators in Singapore, Starhub counts Singapore Telecommunications Limited (SGX: Z74) and M1 Ltd (SGX: B2F) as its rivals in the local scene.

Financials for the quarter

StarHub reports revenue under five segments, namely, Mobile, Pay TV, Broadband, Fixed Network (collectively termed as Service Revenue) and Sale of Equipment.

For the quarter ended 30 June 2014, total revenue dipped slightly by 1.8% to S$576.4 million compared to a year ago. This was due mainly to a 17.2% year-on-year drop in Broadband revenue to S$51 million; the segment had seen stiffer price competition which dampened new and re-contracted businesses despite seeing an increase in the broadband subscriber base.

The other revenue segments performed much better.

Mobile revenue decreased 1.4% year-on-year to S$310.3 million as lower revenue from pre-paid mobile services more than offset an increase in revenue from post-paid mobile services. Mobile continued to contribute to the bulk of Starhub’s total revenue at 53.8%.

Pay TV’s revenue was 3% higher on the back of higher subscription and advertising revenue. The segment is the next highest contributor to Starhub’s top-line at 17.1%.

The last segment’s Fixed Network Services, which grew sales at a clip of 2.2% to S$92 million.

All told, the above dynamics, coupled with a 49% fall in “Other income” to S$5.3 million, resulted in Starhub’s net profit coming in 6.3% lower at S$94.3 million.

Operational highlights

Starhub ended the quarter with 234,000 households subscribing to three services from StarHub. This was a 7% increase from last year’s figure of 219,000. The ratio of households who subscribed to more than one StarHub service had also increased from 57% to 59%. Investors should pay close attention to these figures as as an increase would mean that more customers are locked into StarHub’s suite of services, contributing to higher revenue.

Mr Tan Tong Hai, Chief Executive Officer of StarHub, commented on the quarter:

“We grew revenue and subscriber base in post-paid Mobile, Pay TV and Fixed Network services. Despite pricing competition in the residential broadband sector, we are on track in our strategy to gain market share and grow triple-service Hubbing households. We also continue to make inroads in the Enterprise segment both in the large accounts and SMEs.”

Future outlook and valuation

For the quarter, the firm will be paying S$0.05 per share in dividend, unchanged from a year ago. Going forward, the telecommunications operator said that it had revised its service revenue guidance and now expects its 2014 service revenue to be maintained around last year’s level. The company also intends to keep its annual dividend pay-out at S$0.20 per share for the current financial year.

StarHub shares are currently trading at S$4.16. This translates to a trailing price/earnings (PE) ratio of 20 and a forward dividend yield of 4.8%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.