StarHub Earnings: Positive Signs in Mobile Market; Fair Value Estimate Reduced on DARE+

We reduce our fair value estimate for StarHub to SGD 1.10 from SGD 1.20 as we forecast a slower reduction in DARE+ costs. We see the shares as fairly valued. As we previously expected, StarHub is tracking ahead of its full-year 2023 services revenue growth guidance of a midpoint of 4% but retained its full-year services EBITDA guidance of 22% despite reporting a 21.8% services EBITDA margin in the third quarter and expecting increased DARE+ expenses sequentially in the fourth quarter. Near-term EBITDA is partially a function of the level of included DARE+ expenses, with around SGD 120 million expected to be included in 2023. Management originally estimated the total forecast cost of DARE+ at SGD 310 million then indicated this figure would be lowered at the half-year result. The new figure is expected to be provided at the analyst day on Nov. 28 where DARE+ costs ae expected to be discussed in more detail, but we already factored in an 8% to 10% reduction. Management also retained guidance for 2023 capital expenditures as a percentage of total revenue at a midpoint of 12% despite this number sitting at 7% for the first nine months as the fourth quarter is likely to include significantly more DARE+ capital expenditures.