StarHub’s plan to issue a $220 million bond may be a step toward a special dividend or increasing its dividend payout, CIMB says. “This reinforces our view that StarHub is ripe for capital management given its low and rapidly-falling gearing level.”

It views the issuance as useful given the impending spectrum auction for 4G service, probably in 1H13 it estimates the spectrum could cost $138 million if the auction proceeds. It keeps an Outperform call with $3.90 target, tipping it as its top Singapore telco pick and a preferred regional pick.

“Although StarHub’s existing dividend yield of 5.6%, one of the highest among its regional peers, is already quite attractive, we assume DPS will rise to 22 cents in FY13, implying an even more impressive yield of 6.6%.” The stock is up 1.1% at $3.69, outperforming the STI’s 0.5% decline.