StarHub Lifts Guidance on Strong Revenue, but Some Transformation Cost Delays Also Help

StarHub’s third-quarter 2022 result was ahead of our estimates and full-year guidance, with services revenue up 14.2% year on year, EBITDA down 17.6%, and net profit down 32%. Management lifted full-year 2022 guidance to 12%-15% service revenue growth from the previous “at least 10%”, with service EBITDA margin guidance retained as “at least 20%”. The first nine months EBITDA margin of 23.2% would suggest a full-year services EBITDA margin closer to 22%, despite the fourth quarter being seasonally low-margin. The total capital expenditure/sales ratio is now expected at 9%-12% from the previous 12%-15%, with some of this due to delays in spending into 2023. Indeed, it appears that the outperformance on the margin side may be partly due a three-month slippage in some of the DARE+ projects, which means more of the SGD 270 million of DARE+ related costs to be incurred over 2022 and 2023 will now likely be incurred in 2023 than in 2022 as previously planned. Revenue growth was helped with the JOS acquisition consolidated in the first quarter and the MyRepublic acquisition consolidated in the second quarter, as well as the English Premier League that StarHub began showing in August, but underlying core mobile revenue growth of 6.5% year on year in the third quarter was a highlight.