CIMB upgraded its earnings per share (EPS) estimates for StarHub on expectations the city-state’s second largest telco will raise dividend per share (DPS) payout as it had more cash than it needs.
“We now assume StarHub will raise its quarterly DPS from 5 cents to 5.5 cents from the third and fourth quarter of 2012 and 6 cents from first quarter of 2013,” CIMB said in a report.
The broker said StarHub is ripe for a capital reduction or a higher dividend payout due to its under-leveraged balance sheet with a net debt to EBITDA ratio of 0.6 times, substantially below its target of 1.5 times.
StarHub's free cash flow per share is projected to rise from 16.6 cents per share in 2011 financial year to 22 cents in 2012 and 29 cents in 2013, CIMB said.
StarHub, the dominant player in Singapore’s pay-TV and broadband market, reported a 9% rise in its earnings before interest, tax, depreciation, and amortisation (EBITDA) for October-December. That compared with a 7% EBITDA fall for the Singapore operations of Singapore Telecommunications.
StarHub shares had risen by more than 8% so far this year, underperforming the 13% gain in the broader Singapore index.
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