StarHub Earnings: Near-Term Profit Guidance Lifted but Revenue Reduced; Valuation Decreased

We reduce our fair value estimate for StarHub to SGD 1.20 from SGD 1.24 due to lower-than-expected revenue from enterprise services partially offset by lower forecast costs from Dare+. StarHub lowered full-year 2023 services revenue growth guidance to a midpoint of 4% from a midpoint of 9% previously, but lifted forecast services EBITDA margin to 22% from 20%, implying a slight lift in forecast 2023 EBITDA, but we see the lower revenue forecasts as slightly negative for earnings post-2023. Near-term EBITDA is partially a function of the level of Dare+ expenses included and the expected level of these expenses to be incurred in 2023 was reduced to SGD 120 million from SGD 155 million, due to cost rationalization and some delays in rollout. The total forecast cost of Dare+, currently estimated by management at SGD 310 million will likely be reduced, by around 8% to 10% on our estimates. Guided 2023 capital expenditure as a percentage of total revenue reduced to a midpoint of 12% from a midpoint of 14% previously due to reduced spending and some delays as outlined above.