RHB Group Research’s Singapore research team has kept its “neutral” recommendation on StarHub with an unchanged target price of $1.38, as it expects the telco’s earnings to remain “under pressure”.

“FY2021 core earnings are projected to drop 16% y-o-y, compared to its 15.1% y-o-y drop in FY2020, before recovering some 10% y-o-y in FY2022 due to the rebound in mobile revenue,” writes the team in a report dated April 6.

The lower figures are estimated despite its IT transformation exercise, cost normalisation and extended weakness in its roaming/IDD fees.

To the team at RHB, StarHub’s mobile revenue is expected to stabilise only later in FY2021, as it expects mobile revenue to fall 20 to 25% y-o-y in the 1QFY2021.

The lower revenue is largely attributable to the continued weakness in roaming/IDD, as well as prepaid revenue due to extended travel restrictions.


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The high base in 1QFY2020 ahead of the circuit breaker from April to June 2020 and shorter quarter, is also a contributing factor to the lower revenue in the first quarter, writes the team.

That said, the pressure is likely to be buffered by stable post-paid average revenue per user (ARPU) from the take-up of Mobile+ plans that was launched in August 2020.

The lower mobile revenue figures may also be partly offset by a higher proportion of SIM-only plans.

“For FY2021, we expect mobile revenue to decline a further 6% y-o-y, compared to the 23% y-o-y drop in FY2020, as border restrictions should continue for the better part of the year,” writes the team.

“Despite the stiff competition, StarHub continues to execute well on its digital plan, giga, with over five-fold increase in subscriptions y-o-y,” it adds.

On the other hand, StarHub’s enterprise business is expected to remain its fastest growing segment with a compound annual growth rate (CAGR) of 13% for FY2020 to FY2022, thanks to the resumption in customer spending after projects were deferred due to the pandemic.

The telco’s enterprise business is also expected to perform better on the back of a stronger GDP outlook for 2021, as well as stronger demand for cyber security and cloud computing from digitalisation initiatives and the higher adoption of 5G enterprise use cases.


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That said, StarHub should see a narrower service EBITDA margin to 28% in FY2021 compared to FY2020’s 31.1% owing to a change in revenue mix, lower jobs support scheme (JSS) credits and normalisation of certain operating expenses.

“Margins should also see near-term pressure from IT investments and 5G rollout on the standalone network (3,500MHz) later this year,” writes the team.

Amid the competition and monetisation of 5G services, Singtel remains RHB’s sector top pick at “buy” with a target price of $3.10.

Shares in StarHub closed 1 cent lower or 0.8% down at $1.31 on April 6.