Investment Highlights

• We reiterate our HOLD recommendation on Star Media Group (Star) with unchanged forecasts and fair value of RM0.73/share pegged to a PB multiple of 0.7x.

• We attended Star’s 3QFY18 analyst briefing and came away with the following key takeaways:

1. 3Q adex impacted by SST uncertainty: Star’s chief revenue officer Lydia Wang had shared that for the last few months, the industry was affected by concerns over possible double taxation following the SST implementation on 1 September. However, the Ministry of Finance has recently clarified that there will be no double taxation on the SST with further guidance to come, which comes as a sigh of relief for the industry.

2. Events and exhibition segment to be a key focus going ahead: Star’s event and exhibition revenue for 9MFY18 was up 76% vs. the previous year due to more events being held, also recording a PBT of RM2mil amid better cost management. This segment will be a key focus moving forward, with plans for more events focused on business audiences and the SME segment following its experience with the Star Outstanding Business Awards (SOBA) initiative. An example of this would be the group’s recently launched Export Excellence Awards.

3. dimsum’s next phase: With 800K subscribers, Star’s over-thetop (OTT) platform dimsum is currently available in Malaysia, Brunei and Singapore and is still in its gestation period for the next 3-4 years. The group will continue its regional expansion plan, aiming to partner with regional partners in Southeast Asia. However, we note that the OTT space faces a challenging operating environment amid high competition.

4. Digital transformation updates: Star has inked an agreement with data management platform, Cxense, and has a partnership with Layout International which provides Star with a new content management system to replace a number of its older systems to allow for streamlining of content and improved efficiency and speed to market for its print and digital segments.

5. More cost-savings measures to come: The group will continue its cost optimization efforts and plans on reviewing and consolidating its print routes. Star CFO Ragesh Rajendran also hinted at the possibility of sharing resources with other publishers.

• We maintain HOLD on Star and keep our forecasts unchanged as the new information does not materially deviate from our assumptions. The group faces the following challenges: 1) the sustained decline in print circulation as consumers shift to digital content; 2) the challenging monetization of digital initiatives; and 3) the lack of growth component following Cityneon’s disposal.

Source: AmInvest Research - 10 Dec 2018