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8 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 earnings presentations.

There may be useful and important information that investors can learn from the webcasts and transcripts. A few weeks back, StarHub had released its 2016 first-quarter earnings. I had spent time going through StarHub’s conference call for the results release and picked out eight things that may be important for investors to note.

But before I share them, here’s a quick background of StarHub for some context: As the second biggest player among the big trio in Singapore’s telecommunications industry – the others being Singapore Telecommunications Limited (SGX: Z74) and M1 Ltd (SGX: B2F) – StarHub organises its business into five different segments, namely, Mobile, Pay TV, Broadband, Entreprise Fixed, and Handset Sales. The first four are collectively known as Services revenue.

You can also read more about StarHub in here.

With that, here are my notes:

  1. Chief executive Tan Tong Hai started the conference by saying that the most important thing for StarHub was that its Services revenue remained stable. Despite the lack of Services revenue growth, Starhub’s EBITDA (earnings before interest, taxes, depreciation and amortization) rose by 13%. The telco’s EBITDA margin also came in at 33.8%.
  2. Progress on the business segments were next. First-quarter Mobile revenue was lower by S$7.3 million due to lower usage of IDD, voice, and roaming services. Meanwhile, Pay TV revenue also fell by S$1 million due to a lower subscriber base. Broadband revenue grew by S$5.4 million, or 11.3%. Tan pointed out that there has been five quarters of sequential growth in the segment. Finally, the Enterprise Fixed Services revenue increased by S$4.9 million. Tan noted that the segment’s revenue was higher than Pay TV in the quarter.
  3. Dennis Chia, StarHub’s chief financial officer, said that StarHub’s cost of sales had declined due to lower handset sales and cost of services. Pay TV programming cost was being rationalised as well. Chia also added that StarHub’s free cash flow (FCF) per diluted share stood at S$0.052. Notably, this figure is a touch above its quarterly dividend of S$0.05 per share, which is encouraging. Chia also said that capital expenditure for the first quarter was 7.1% of revenue, lower than the 13.5% recorded last year.
  4. Chief marketing officer Howie Lau added more details around the performances of StarHub’s various business segments. He said that the Mobile services customer base had increased by 51,000 over the past year, with increases from both post-paid and pre-paid customers. Post-paid ARPU (average revenue per user) increased by S$1 to S$69. Pre-paid ARPU, though, fell by S$1 to S$17.
  5. For Pay TV, Lau said that the customer base had reduced by 17,000 year-on-year. The reason for the fall was Starhub’s decision to stop promoting TV Lite. ARPU for Pay TV remained stable at S$51.
  6. Meanwhile, the broadband services segment saw a fall of 3,000 subscribers compared with the previous quarter. ARPU, though, rose from S$35 in the previous quarter to S$36 in the latest quarter. Lau said that it was due to the conversion of customers to higher speed plans.
  7. Finally, Kevin Lim, Starhub’s chief commercial officer, talked about the Enterprise Fixed services. He said that data and internet revenue rose 5% year–on-year while voice revenue recorded a 7% increase.
  8. Tan also reiterated Starhub’s 2016 outlook. StarHub is expecting low single digit growth for its services revenue. EBITDA margins are expected to be at 31% while capital expenditure is slated to be around 13% of total revenue. This is unchanged from the previous quarter.

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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 doesn’t own shares in any companies mentioned.