TELECOM & INTERNET | Staff Reporter, Hong Kong

HKBN's profit for 1H15 jumped 15% to $482m

The company posted solid 1HFY15 results.

HKBN reported a solid set of results post its recent IPO.

According to a research note from Barclays, the company's service revenue grew by 9.3% y/y, driven by sub expansion on both the residential and enterprise side, while residential ARPU also grew by 6% y/y and 2% h/h.

Meanwhile, 1H EBITDA was HK$482mn (+15% y/y), implying margin (off service revenue) at 43.8%, improved by 230bps y/y thanks to operating leverage.

Reported net income was a HK$47mn loss due to IPO related one-off and debt restructuring costs. Adj. net income was HK$160mn (+29% y/y) and Adj. FCF was HK$185mn (+4% y/y). DPS was not distributed for 1H, given the IPO was after the interim period.

Here’s more from Barclays:

Management highlighted its strategy of growing sub base first and then seeking opportunities to up-sell, and we think the targeted new sub will be ARPU accretive.

Overall, we expect HK's broadband market will continue to sustain value accretion, whilst HKBN's expanding scale should drive operating leverage, which only helps its investment case further.

Focusing on private estates and bundles in residential market: 1) HKBN indicated faster pace on acquiring sub from private estates seen in 1HFY15, positive in our view given these sub come with higher ARPU.

Private estates are also seen as key targets for acquiring new sub going forward. 2) HKBN is also pushing voice and 100MBps broadband bundles at an estimated price of HK$209, which is ARPU accretive as well, given 1HFY15 residential ARPU of HK$184. 3) Percentage of sub on higher-than-100Mbps services is not disclosed but indicated higher than the 16% reported in FY14.

Focusing on sub acquisition in enterprise market: enterprise account grew by 3k to 35k in 1HFY15 but ARPU was modestly down by 3% y/y (or 1% h/h) to HK$1,025.

A clear preference for growing scale first is indicated given only c3% revenue share in this segment, according to the management, and they see ample upside potential on ARPU growth in the future as well, mainly rising from expanding product offerings.

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