StarHub stocks more expensive than SingTel, M1: Barclays

The implied 5.3% yield is at its lowest in a long time.

Here's more from Barclays:

2Q12 was above our estimates and rendered StarHub's (unchanged) full-year guidance as conservative - we raise our estimates. The bias in estimate revisions to the upside and yield have buoyed the stock. However, going ahead, we continue to struggle to justify reasons to own the stock at these levels.

StarHub is the most expensive of the three Singapore telecom stocks and the implied 5.3% yield is at its lowest in a long time. We stay UW although our higher estimates push up our 12-month price target to S$3.

Our key takeaways from the 2Q12 results: (1) The higher margins came as a positive surprise, largely driven by lower costs (vs. higher revenue); (2) the pay-TV business had a one-off positive impact from the UEFA EURO event broadcast in June; (3) flat mobile revenue and the shrinkage (though marginal) in pay-TV and broadband subscribers validated our longer term concerns; and (4) the return to a capital surplus (more than 20 cents per share) looks unlikely for 2012.

Higher estimates drive our higher price target of S$3. We revise our EPS estimates up 4.0% for 2012 and 3.0% for 2013. Our revenue estimates are largely unchanged so the higher earnings are driven by wider margins. We now expect an EBITDA margin of 30.5% (off service revenue) for 2012 (vs 30.9% for 1H12) - StarHub has maintained its 30% guidance, citing the costs associated with the new iPhone launch later this year as a key reason. Our higher estimates drive our higher price target of S$3 vs. S$2.75 previously.

2Q12 results were better than our estimates: EBITDA at S$174mn (+9.1% y/y) was higher than our estimate of S$167mn, and the net profit at S$86.7mn (+11.2% y/y) was higher than our estimate of S$80mn. Service revenue (+3.9% y/y) was in line with our estimate.

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