StarHub seen raising dividend on better earnings

StarHub Ltd, Singapore's second-largest telecoms firm, is likely to pay a slightly higher 2005 dividend than earlier announced as its cable TV and broadband operations drive earnings growth, analysts said on July 14. StarHub, also the city-state's second-biggest mobile phone operator and the sole cable television services provider, wants to return excess cash to shareholders in the absence of any plans to expand at home and abroad.
Analysts say StarHub, which had S$175 million in cash at the end of March, may hand out as much as 9.3 cents per share in its 2005 dividend, up from at least 8 cents the firm had promised in May. It will unveil its maiden interim dividend with quarterly results in early August.
They forecast an even bigger cash return next year.
If the company pays 8 cents this year, that would give StarHub a dividend yield of 4.4 percent, compared with rival Singapore Telecommunications Ltd's 3 percent and MobileOne Ltd's (M1) 5 percent.
Morgan Stanley said it was forecasting a dividend of 9.3 cents for 2005, 11.7 cents for 2006 and 12.6 cents for 2007.
Citigroup Smith Barney analyst Anand Ramachandran said he expected solid dividends, forecasting a payout of 8.0 cents this year and rising to 8.5 cents in 2006 and 9.0 cents in 2007.
"We see this as easily sustainable, given robust cash flows and reserves on the balance sheet," he added.
StarHub spokeswoman Jeannie Ong declined to discuss details of the payout but confirmed it planned to return all surplus cash to shareholders as it had no plans for overseas acquisition.
Goldman Sachs analyst Coo Way Law saw StarHub giving out 8.29 cents this year, 9.07 cents next year and 11.17 cents in 2007.
StarHub is expected to post net profit of S$138.2 million for 2005, swinging from a 2004 loss of S$52.4 million, according to the mean forecast from 13 analysts polled by Reuters Estimates.
Analysts expect StarHub's sales to be bolstered by the migration of subscribers to digital from analogue cable television, and as more public housing dwellers sign up for the service.
Its broadband business will also benefit from higher market share and higher average revenues per user (ARPUs) as more subscribers sign up for higher speed access plans.
StarHub shares, which listed on the Singapore Exchange last October, have surged 52.5 percent in the last six months, against a 11.6 percent gain for SingTel and a 12.8 percent rise for M1.