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PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 25 Jun 2019, 11:52 AM

 

Star Media Group Berhad - Off To A Slow Start

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Star Media Group (Star) reported a weaker 1QFY19 with revenue of RM82.5m and a net profit of RM3.6m, mainly due to subdued performances in all segments. Results came in below expectations, accounting for 19.6% and 16.1% of our and consensus’ full year net profit estimates respectively. In view of the challenging environment in the traditional media sector given the change in consumer media consumption patterns and poor market sentiment, we trim our FY19-21F earnings by 11%-15% as we impute lower growth rates. We roll over our valuation base year to FY20F. Our P/BV-based TP is revised to RM0.74 (RM0.78 previously). Maintain Neutral.

  • 1QFY19 revenue dropped by 24% YoY due to lower revenue contributions from all business segments. Based on Nielsen Media Research, traditional adex declined by c.12% YoY while newspaper adex fell by c.22% YoY. Due to weaker consumer confidence and business sentiment, advertising expenditure (adex) has been weak and is expected to continue its current downtrend. Radio division continued to record lower revenue due to the slow down in advertising revenue. However, the group enjoyed higher PBT when compared to the immediate preceding quarter as a result of better cost management from previous restructuring exercises. Star recorded a higher PBT of RM5.7m this current quarter as compared to RM2.4m in 4QFY18 after stripping out the one-off MSS/ERO cost of RM15.8m.
  • Outlook. We expect the sector to continue to be challenging due to its gloomy environment especially in the traditional print media segment. However, as the company is slowly transitioning into a digital-focused media group, we believe that the growth in the Digital segment may soften the impact from the decline in the print media segment. The group’s Over-The Top (OTT) service, dimsum, continues to provide its subscribers with more content with simulcast and exclusive premieres from its Asian partners. As for the radio segment, the lower adex due to a slowing economy and weaker consumer sentiment is expected to continue to affect it in a negative way. Nevertheless, we believe that with previous restructuring activities, Star should see an improvement in margins due to better cost control.

Source: PublicInvest Research - 17 May 2019

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