SG: MARKET PULSE: StarHub, Ezra (3 Jun 2013)

Stock Name: StarHub
Company Name: STARHUB LTD

Research House: OCBC

Price Call: HOLD

Target Price: 3.82

Stock Name: Ezra
Company Name: EZRA HOLDINGS LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.10

MARKET PULSE: StarHub, Ezra

3 Jun 2013

KEY IDEA StarHub Ltd: Upgrade to HOLD on valuation grounds Summary: StarHub Ltd saw a sharp 15% drop in its share price after we downgraded our call from Hold to Sell on 10 May following its 4Q12 results announcement. Besides a more muted guidance from management, investors were also seen switching out of the defensive stocks like telcos as the yield compression story is starting to lose its appeal. And since we are using a DCF-based valuation methodology, higher bond yields will result in our fair value easing from S$4.00 to S$3.82. Fortunately, as StarHub has maintained its S$0.20/share dividend payout this year (and is likely to continue to do so in our view), its dividend yield has risen back to around 5% (or 5.2% based on our fair value). From a valuation perspective, we upgrade our call from Sell to HOLD. (Carey Wong) MORE REPORTS Ezra Holdings: Long-term growth in the SURF market Summary: Ezra Holdings (Ezra) announced last week that a pipe-lay vessel (Lewek Centurion) of its subsea division has been contracted for some 60km of pipeline installation work. The new customer is Cecon, and Ezra sees this as a potential platform for both contractors to develop further joint project opportunities going forward. The subsea, umbilicals, risers and flowlines (SURF) market is currently in a growth phase, and a number of subsea units are expected to be incorporated in the coming years. Still, we expect time is required for large project awards to be dished out; this especially after uncertainty in the Eurozone has weighed on sentiment. As at mid Apr, Ezra's subsea backlog stood at more than US$1.1b vs US$850m in end Nov 2012. Maintain HOLD with S$1.10 fair value estimate. (Low Pei Han)

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