Hot stock: StarHub shares jump 9.8% on Q3 results, 5G bid plans

SHARES of StarHub rose as high as 9.8 per cent to S$1.45 on a cum-dividend basis during morning trade on Wednesday. This is compared with the previous day's closing price of S$1.32.

The climb started shortly after the market opened, with the counter rising 9.5 per cent to S$1.445 as at 9.17am.

The mainboard-listed telco released its third quarter results on Tuesday which saw its net profit up 1.7 per cent. The group also said it was cutting its full-year service revenue forecast.

Plans for a joint 5G bid with another mobile network operator are also being weighed, said chief executive Peter Kaliaropoulos in an earnings call on Tuesday.

On Wednesday morning, DBS Equity Research upgraded its call on StarHub to "buy" with a higher target price of S$1.43 due to a "good entry point with a catalyst in place". While StarHub's operating metrics remain weak, the share price may benefit from significant capex reductions over fiscal 2019/2020, DBS analyst Sachin Mittal said.

He added that new entrant TPG Telecom is struggling to fulfil its network rollout obligations as reflected in TPG paying some S$9 million to StarHub in the third quarter for in-tunnel coverage, strengthening the case for consolidation in the sector.

CGS-CIMB also upgraded its "hold" call to "add", maintaining its discounted cash flow-based target price of S$1.65, factoring in 5G spectrum and network rollout capex from fiscal 2021 onwards. The upgrade was due to the management "executing well" on its opex or capex savings initiatives, CGS-CIMB analyst Foong Choong Chen said.

"This should help to buffer against adverse revenue effects from TPG's entry, which should give investors greater confidence on earnings delivery and act as a re-rating catalyst," he added.

Meanwhile, OCBC Investment Research maintained its "hold" call with a reduction in fair value to S$1.42 from S$1.52 after incorporating adjustments. It added that StarHub's third-quarter results were "broadly within expectations".

"Management has continued to signal that competition within the mobile service still remains intense, while its pay TV segment would probably only achieve revenue stability from Q1 2020 onwards," it said.