Wednesday, July 31, 2013

StarHub Ltd: Downgrade to SELL; BPL likely non-event (OCBC)

StarHub Ltd:
Fair value S$3.82
add: 12m dividend forecast S$0.20
versus: Current price S$4.26

Downgrade to SELL; BPL likely non-event
• Likely no major BPL boost
• More downside risk ahead
• Downgrade to SELL

StarHub Ltd will be able to cross carry the widely-followed BPL (Barclays Premier League) live matches for the upcoming 2013 to 2016 seasons. However, with a seemingly steep price point of S$59.90/month (before GST) for new subscribers (while existing mioTV subscribers continue to pay the current S$34.90 (before GST)),
we suspect that any migration of subscribers from mioTV to StarHub’s cable TV platform would be quite muted. In light of the likely muted boost from the BPL cross carriage and recent strong run-up in share price (9.5% after our upgrade on 3 Jun), we feel that the stock may have run ahead of its fundamentals. As we are also keeping our DCF-based fair value unchanged at S$3.82 (already accounted for a higher risk-free rate), we foresee more downside risk from here. Hence, we downgrade our call back from Hold to SELL.

BPL cross-carriage likely non-event
StarHub Ltd will be able to cross carry the widely-followed BPL (Barclays Premier League) live matches for the upcoming 2013 to 2016 seasons; this after rival SingTel’s appeal against the MDA’s (Media Development Authority) direction was rejected. However, with a seemingly steep price point of S$59.90/month (before GST) for new subscribers (while existing mioTV subscribers continue to pay the current S$34.90 (before GST)), we suspect that any migration of subscribers from mioTV to StarHub’s cable TV platform would be quite muted. And even if there are migrations, StarHub subscribers will be paying the fees directly to SingTel.

Strong recovery after our upgrade
Meanwhile, StarHub has seen a strong recovery after we upgraded our rating from Sell to Hold on 3 Jun, with the stock rising some 9.5% to a recent S$4.39 high. Back then, we note that the dividend yield has risen back to around 5% (or 5.2% based on our fair value), but based on current price, the yield has fallen back to 4.7%, which is just decent. However, with 10-year SGS bond yields back to around 2.5%, we feel that further upside from here may be capped, especially with consensus siding towards further rate increases in the future.

Downgrade to SELL
In light of the likely muted boost from the BPL cross carriage and recent strong run-up in share price, we feel that the stock may have run ahead of its fundamentals. Recall previously that StarHub has guided for a lower single-digit revenue growth while maintaining its service EBITDA margin at 31%. As we are also keeping our DCF-based fair value unchanged at S$3.82 (already accounted for a higher risk-free rate), we foresee more downside risk from here. Hence, we downgrade our call back from Hold to SELL.


Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 30/07/13

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Warren E. Buffett(沃伦•巴菲特)
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别人贪婪时我恐惧, 别人恐惧时我贪婪
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做自己熟悉的事,等到发现大好机会才投钱下去

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“犯错误并没有什么好羞耻的,只有知错不改才是耻辱。”

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高估期间, 卖对, 不卖也对, 买是错的。
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Tan Teng Boo


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合股做生意,则公司股份的业绩高于一切,而股票的价值决定于盈利。
价值是本,价格是末,故公司比股市重要百倍。
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1.有智慧,不如趁势
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成功者所以成功,是因为不怕失败!失败者所以失败,是失败后不再尝试!
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