StarHub - COPY

StarHub > Buy

Maybank Kim Eng, Oct 4

Oct 5 close: S$1.97

Target price: S$2.21

MANAGEMENT will be cutting headcount by 300 or 12 per cent of its 2,500 workforce as part of its digitalisation and reorganisation efforts. The S$25 million restructuring cost has no impact on 2018 guidance as provisions were made in prior periods. Factoring in both S$30 million of annual staff reduction costs for 2019 onwards, we raise core earnings per share by 11-15 per cent.

Management also intends to rationalise procurement, leasing, repair & maintenance and distribution costs. Its target is to save S$210 million over 2019-2021. Part of the savings will be re-channelled to new growth opportunities which will lessen the positive net cash flow impact.

As such, we have only taken staff-cost savings in our new forecasts. With staff-cost savings alone and no other changes in revenues or opex, our 2019-2020 forecasts are already significantly raised. Admittedly, new competition from Q4 2018 onwards and possible ownership changes at another competitor could affect the industry and StarHub's revenue outlook.

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