If you're not a StarHub stockholder yet, perhaps it's time to be one

Analyst says StarHub was the best performing telco stock in 2011.

OCBC Investment Research reported:

StarHub Ltd saw 4Q11 revenue climbed 9.6% YoY and 7.1% QoQ to S$612.6m, or 6.9% above our forecast, driven by higher equipment sales on the back of strong demand for the new Apple iPhone 4S.

Net profit for the quarter climbed 15.1% YoY and 22.1% QoQ to S$92.6m, nearly 28.3% above our estimate, aided by lower operating expenses and also increases in grants recognised for the increased adoption of NBN services.

For FY11, revenue rose 3.3% to S$2312.0m, or 1.7% above our estimate, while net profit climbed 19.9% to S$315.5m, or 6.9% above our forecast. StarHub declared a quarterly dividend of S$0.05, bringing the total payout to S$0.20 per share as guided.

For 2012, management expects the operating revenue to grow in the low single-digit range, with its EBITDA margin holding steady at 30% of service revenue.

For its key mobile segment, StarHub believes that the demand for services will remain fairly resilient to any economic slowdown, and further expects mobile data usage to increase. On its Pay TV segment, it expects content costs to remain high. For broadband, while it expects demand and price competition to increase in the consumer segment, it sees new growth opportunities in the corporate segment.

It also expects to spend around 11% of operating revenue as capex; this also includes maintenance capex to meet the IDA’s recently-announced stricter service requirements. And as before, it will maintain its S$0.20 per share dividend, or S$0.05 per quarter.

We have modestly bumped up our FY12 earnings estimate by 4% to account for the margin improvement. And in line with its latest capex guidance, our DCF-based fair value improves from S$3.00 to S$3.10.

While StarHub was the best performing telco stock in 2011, we continue to like its defensive earnings and attractive dividend yield. Maintain BUY.

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