CGS-CIMB has raised its target price on StarHub : CC3 0% to S$1.19 from S$1.15 after the group announced lower Dare+ cost assumptions to S$270 million from S$310 million.

Launched in 2021, StarHub’s Dare+ initiative builds the telco’s 5G network and other IT expenditures as part of its five-year growth map. StarHub now expects to spend S$85 million in Dare+ investments for FY2023, and expects no further material delays to its Dare+ spending in FY2024 as most initiatives are soon to be completed.

In a Tuesday (Nov 28) report, CGS-CIMB raised its FY2024 earnings per share (EPS) assumptions by 15 per cent and 21 per cent for FY2025. It maintained its “hold” recommendation on the counter, as it projects the pace of earnings recovery to be uncertain, particularly in FY2024.

DBS Group Research, meanwhile, maintained “buy” on StarHub with an unchanged target price of S$1.25, it said in a separate report on Wednesday.

It expects a compounded annual growth rate (CAGR) of 9 per cent for the group’s earnings in FY2023-2025. It believes StarHub’s share price could re-rate to 15 times earnings from 12.3 times, although below its five-year historical average of 17.6 times.

It noted that a key growth driver in FY2024 would be the group’s 3G network shutdown, which could result in cost savings. FY2025, meanwhile, may see the replacement of more legacy services by newer cloud-based services.

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Furthermore, cybersecurity provider Ensign, the group’s joint venture with Temasek, has observed growth in its cybersecurity business – making it “much more valuable” than what is reflected in StarHub’s share price, DBS said.

The research house noted that Ensign has grown consistently at a CAGR of 30 per cent over the last five years, despite being loss-making due to its continued investments for growth.

In its third-quarter results announced on Nov 8, StarHub said that it will retain its assigned rights for Ensign for two additional years until Oct 4, 2025, maintaining the group’s effective interest at 55.73 per cent.

DBS estimates that Ensign alone could be worth S$600 million to S$900 million, which brings StarHub’s stake to a value of S$330 million to S$500 million, or about 17 per cent to 26 per cent of the telco’s market capitalisation of S$1.9 billion.

“While Ensign’s Ebit (earnings before interest and taxes) contribution is currently relatively small (9 per cent of its FY2022 Ebit), we believe the subsidiary is well-positioned to capture longer-term tailwinds from growing cybersecurity spending across Asean,” noted CGS-CIMB. 

Shares of StarHub were trading 0.9 per cent or S$0.01 higher at S$1.09 as at 4.29 pm.