7 Quick Things Investors Should Learn About StarHub Ltd

StarHub Ltd (SGX: CC3) is one of the cool companies in Singapore that shares webcasts and/or transcripts of their quarterly earnings presentations (the link for StarHub is here).

As the second in size among the big trio in Singapore’s telecommunications industry behind Singapore Telecommunications Limited (SGX: ZY4) and ahead of M1 Ltd (SGX: B2F),  StarHub has five business segments, namely, Mobile, Pay TV, Broadband, Fixed Network Services and Handset sales. The first four are collectively known as Services revenue.

You can read more about StarHub in here.

Diving in

Below are seven useful things I learned from reading the transcript of StarHub’s fiscal second-quarter webcast:

  1. Chief Executive Officer Tan Tong Hai made a couple of observations for the second-quarter:
    • Starhub’s EBITDA (earnings before interest, taxes, depreciation and amortization) margin was 35.1% for the second-quarter. This is up from the 30% EBITDA margin that was recorded in the first-quarter of 2015. For the first-half of 2015, the EBITDA margin was 32.6% which is in line with the company’s guidance for the year.
    • Capital expenditures for the reporting quarter was 11% of revenue, down from 15% in the previous quarter. As a result, the telco’s free cash flow grew substantially in the second-quarter of 2015 as I had noted in an earlier article of mine covering the firm’s latest earnings release.
  2. Sales from Pay TV declined slightly by 0.6% despite the customer base having stepped up from 535,000 in the second-quarter of 2014 to 545,000 in the reporting quarter. Tan said it was due to lower advertising revenue. This decline may be something worth watching as alternative advertising formats – such as Google Inc’s YouTube and Facebook Inc’s video efforts – start to gain prominence.
  3. For the second-quarter, Broadband revenue declined by $2 million compared to the same quarter a year ago. Tan noted that the decline was smaller when compared to the previous quarter’s $5.8 million drop. Starhub’s chief executive was also reasonably happy with two quarters of sequential growth in broadband revenue.
  4. Elsewhere, Tan also noted that the revenue contribution from Starhub’s Fixed Network Services segment is now coming close to matching the contribution from the Pay TV segment. Starhub reported that 16.6% of its revenue in the second-quarter of 2015 came from Pay TV while 16.4% of revenue was from Fixed Network Services. The Mobile segment still remains Starhub’s bread-and-butter however, as it contributed 52.7% of total revenue for the reporting quarter.
  5. An analyst enquired about the sustainability of Starhub’s current quarterly dividend of S$0.05 per share. Tan responded by expressing confidence that the dividend is sustainable, and that Starhub looks at its dividend from a three year perspective. Foolish investors may want to note that the net debt position at Starhub has grown over the years while its free cash flow was barely covering its dividend-needs in 2013 and 2014.
  6. Responding to another question on competition, Tan said that Starhub’s offerings were fairly diverse and that the company will be focusing on its Hubbing strategy (a package of different services bundled together). On that note, triple service households (households with three Starhub services) increased from 234,000 to 246,000 while dual service households increased from 212,000 to 220,000 on year-on-year comparisons.
  7. When asked to comment about the threat of video on demand services like those from the U.S.-based Netflix Inc, Tan responded by saying that Starhub may work with over-the-top (OTT) services by offering customer identity authentication services. He also felt that OTT services can be complementary to Starhub’s offerings, citing Netflix’s collaboration with other traditional TV operators in other markets.

Foolish takeaway

To buy and hold a company’s shares for the long-term also means the need to keep up with developments in the firm.

The access to management teams via webcasts and transcripts gives the Foolish investor a fair chance to judge for themselves whether they would like to be invested alongside those teams. It also helps us put together a more complete thesis around a company and keep up with developments in its industry.

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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 Chin Hui Leong owns shares in Netflix Inc. and Google Inc.