Kim Eng Securities upgrades StarHub (CC3.SG) to Buy from Sell on optimism over telco’s $0.20/share dividend payout this year, FY11 earnings prospects, says Dow Jones.

Kim Eng lifts target price to $2.78 from $1.87, based on average sector P/E of 15x FY11 earnings vs 10x FY10 P/E previously.

Broker says launch of Singapore’s high-speed national broadband network in 3Q10 should benefit StarHub as telco’s enterprise operations will be able to offer more choices to SMEs, access more downturn commercial buildings currently locked into rival SingTel (Z74.SG).

Adds spike in mobile subscriber acquisition costs due to launch of iPhone 3GS last December is leveling off, while pressure on pay-TV business appears contained. Shares +0.4% at $2.34.