Investing

StarHub Ltd – The Good And Bad That Investors Should Know About Its Latest Quarterly Result

StarHub Ltd (SGX: CC3) is one of three Singapore telecommunication companies that also include Singapore Telecommunications Limited (SGX: ZY4) and M1 Ltd (SGX: B2F). StarHub has five business segments, namely, Mobile, Pay TV, Broadband, Enterprise Fixed and Equipment sales.

The company has recently reported its second-quarter FY17 result. In this article, we will look at the good and bad from the announcement.

Overall financial result

Source: Starhub FY17 2nd quarter result presentation

Overall, we can see that total revenue is marginally lower by 1% year-on-year.

Net profit fell even more – by 21% year-on-year – mainly due to lower services revenue, absence of NBN grants, higher finance expense and absence of one-time fair value gain.

Of the five segments, only Enterprise Fixed Services and Equipment Sales recorded positive revenue on a year-on-year basis.

Negatives:

There were a few negative points in the quarter that investors might want to pay attention to.

Firstly, the average revenue per user (ARPU) declined for mobile, pay-tv and broadband services.

Secondly, cost of sales grew by 4.5%, despite flat revenue, mainly due to increase in cost of equipment and cost of services. This was offset by lower “other” operating expenses.

Thirdly, EBITDA margin was down by 1.5% from 34.7% last year to 33.2% this year mainly due to revenue declining faster than operating cost.

Lastly, Starhub’s free cash flow was significantly lower at $16 million, as compared to $137 million in the same period last year.

Positives:

Despite the overall negative tone of the quarter’s report, Starhub delivered some positives news.

Firstly, its overall customer numbers were up for both prepaid and postpaid services, despite a decline in average revenue per user (ARPU). As a result, its mobile market share was up from 26.9% a year ago to 27.0%.

Secondly, the Enterprise Fixed segment grew its revenue primarily due to increased revenue from data and internet services, which was partially offset by lower voice revenue.

Conclusion:

In summary, Starhub’s latest result reflects the continuous challenge within the telecommunication industry.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.

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