StarHub Ltd’s Latest Earnings: What Investors Need to Know

Yesterday, StarHub Ltd (SGX: CC3) announced its third-quarter earnings results. The financial period was from 1 July 2017 to 30 September 2017.

The firm is Singapore’s second largest telecommunications company. It has five business segments – Mobile, Pay TV, Broadband, Enterprise Fixed and Sales of Equipment. The first four segments are collectively known as service revenues.

With that, here’s a quick rundown of the financial figures from the latest quarter:

1. Total revenue declined 0.8% year-on-year to S$580.4 million, mainly due to lower revenues from Mobile, Pay TV and Broadband services, along with a decrease in sales of equipment.

2. Services revenue was down 0.1% as compared to a year ago, coming in at $545.4 million.

3. Net profit slipped 11.5% to S$76.2 million.

4. Consequently, diluted earnings per share for the quarter was 4.3 Singapore cents, down from 4.9 cents last year.

5. StarHub’s balance sheet strengthened for the quarter. As of 30 September 2017, StarHub had S$454.3 million in cash and cash equivalents, and S$977.5 million in total debt. This translates to a net debt position of S$523.2 million. At the end of last year, it had a higher net debt of S$702.3 million.

6. For the quarter, cash flow from operations was S$172.5 million and S$52.4 million was spent on capital expenditure. Therefore, the telecommunication outfit brought in S$120.1 million of free cash flow, an improvement from just S$2.4 million raked in a year ago.

For the third quarter, mobile continued to be the primary contributor to total revenue at 51.2%. Enterprise Fixed services revenue was the second largest contributor at 18.8%. Pay TV, Broadband, and Sales of Equipment contributed 14.8%, 9.2% and 6% of turnover respectively.

For the nine months ended 30 September 2017 (YTD2017), total revenue fell 0.6% to S$1.75 billion while net profit tumbled 18.3% to S$234.9 million.

Total Mobile revenue fell 0.8% to S$895.9 million as compared to YTD2016. The post-paid customer base decreased by 11,000 year-on-year due to a one-time termination of 23,000 inactive legacy data-only lines. The post-paid average revenue per user (ARPU) and pre-paid ARPU were both down by S$1 to S$69 and S$15 respectively. Churn rate was at 1%, excluding the one-off termination.

Moving on, Pay TV revenue was down by a massive 7.7% to S$262 million for the nine months to 2017. This was due to a 40,000 fall in subscriber base to 467,000. Compared to last year’s corresponding nine-month period, churn rate was at 1%, and ARPU remained flat at S$51.

Broadband revenue decreased 1.8% to S$159.7 million as compared to YTD2016. The decline was due to a lower subscriber base of 466,000, partially offset by a higher mix of customers on fibre plans. For YTD2017, ARPU was flat at S$37.

Enterprise Fixed was the only business segment that grew both for the quarter and year-to-date. For YTD2017, revenue from this segment rose 5% to S$307.3 million, mainly driven by managed services.

Sales of Equipment revenue rose 5.8% to S$126.8 million for the nine-month period, due to sales of higher mix of premium handsets.

Shareholders will receive an interim dividend per share of four cents for the third quarter, down from five cents paid out one year back. The management team also restated its intention to maintain the quarterly four cents per share dividend payout for 2017.

Tan Tong Hai, StarHub’s chief executive, commented on the third-quarter results:

“This quarter, we are further seeing the fruits of our growth strategy as shown by the encouraging double-digit increase in our Enterprise Fixed revenue. We will continue investing in the enterprise space to drive our future growth.

We have recently struck Singapore’s first bank-telco strategic partnership with OCBC Bank. By harnessing our collective data insights, we can better understand customers’ needs and deliver even more relevant services to enhance their connected lifestyles.”

Shares of the telco are going at S$2.70 currently. This translates to a trailing price-to-earnings ratio of 16 and a dividend yield of close to 6%.

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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.