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The Good And Bad That Investors Should Know About StarHub Ltd’s Latest Quarterly Earnings

StarHub Ltd (SGX: CC3) is a company that likely needs no introduction, given that it’s the second largest operational telco in Singapore.

In early May, StarHub reported its 2018 first quarter earnings update. There are both positive and negative takeaways that investors may want to learn about.

The negatives

Firstly, StarHub’s revenue and profit attributable to shareholders both declined compared to a year ago. The former fell by 4.7% to S$561.0 million, while the latter came in 14.9% lower at S$61.5 million. The decline in the company’s revenue was mainly driven by weaker performances in its Mobile and Pay TV segments (revenue declines of 7.1% and 10.0%, respectively).

Secondly, there were declines in the average revenue per user (ARPU) and subscriber numbers for the Mobile and Pay TV segments. For Mobile, the pre-paid ARPU fell by 13.3% year-on-year to S$13 per month in the first quarter of 2018; the post-paid ARPU dipped by 4.4% to S$43 per month. Pay TV’s ARPU suffered a gentler decline of 1.9% year-on-year to S$51 per month.

Thirdly, The Service businesses’ EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin was down from 32.8% in the first quarter of 2017 to 32.1% in the first quarter of 2018, mainly due to its revenue declining faster than its operating costs. The Service businesses consists of the Mobile, Pay TV, Broadband, and Enterprise Fixed segments.

Lastly, StarHub’s free cash flow in 2018’s first quarter was S$9.9 million, which is significantly lower than the free cash flow of S$116.5 million seen in 2017’s first quarter.

The positives

Firstly, the Enterprise Fixed segment enjoyed a strong 18% year-on-year increase in revenue to S$117.5 million mainly due to higher revenue from data and internet services, and managed services. This was the third successive quarter of double-digit year-on-year revenue growth for the segment.

Secondly, Broadband revenue also came in higher in the reporting quarter (a 0.6% year-on-year increase to S$47.5 million) due to a higher mix of customers on the higher-speed fibre plans. Year-on-year, the number of fibre broadband subscribers grew from 370,000 to 387,000, outpacing the 1,000 decline in residential broadband subscribers.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.