iPhone5 subsidies to impact Starhub's margins in 4Q

But the 30% margin guidance is likely conservative.

According to Barclays, 3Q results were in line at the operating level but higher on profits from higher non-operational items. The resilient 5.5% yield and stable earnings are the primary drivers of the stock's resilience – this is not likely to change short-term. We continue to struggle to find reasons to own the stock at these levels. StarHub is the most expensive of the three Singapore telecom stocks and the implied 5.5% yield is similar to a peer group.

Here's more from Barclays:

3Q results: Operationally in line, higher on profits. EBITDA at S$179mn (+10.1% y/y) was comparable with our S$175mn view. Lower depreciation and higher amortized rollout grants on NGNBN and adoption grants (recognized as other income) drove S$96.2mn (+26.9%yoy) in profits, higher than our S$82mn view. Service revenues (+2.3% y/y) were modestly lower on lower mobile revenues as outlined above.

Key takeaways from results: (1) Mobile revenues were slightly lower but these came on as roaming interconnect agreements kicked in; associated traffic costs were lower as well; (2) iPhone5 associated subsidies are expected to impact margins in 4Q but StarHub's margin guidance for the full year at 30% is likely conservative – our fine-tuned estimates incorporate 31.1%; (3) flat mobile revenues and shrinkage (though marginal) in Pay TV subscribers keeps our longer-term concerns intact, but broadband subscribers returned to modest growth.

Marginal earnings revisions: We revise EPS estimates up by 5.3% and 3.4% for 2012 and 2013 to incorporate 3Q detail. Our EBITDA estimates are up 1.9% and 1.5% for the two years.

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