Investment Highlights

• We maintain our HOLD recommendation on Star Media Group (Star) with unchanged fair value of RM0.73/share pegged to a PB multiple of 0.7x. We have raised FY18FFY20F forecasts by 3-6% following the group’s recent announcement of higher cover prices for its newspapers.

• Star has increased the cover prices for its newspapers by 30 sen where the price of its daily newspaper was raised from RM1.30 to RM1.60 while that of its weekend edition, the Sunday Star. was also up from RM1.50 to RM1.80.

• After imputing the aforementioned cover price changes, FY18F-FY20F total revenue has been raised by 2%. Historically, net circulation revenue accounts for approximately 10% of group total revenue.

• We are neutral on this development despite the higher cover price of its daily newspaper being similar with competitors such as the News Straits Times (NST) and The Edge Financial Daily (TEFD) at RM1.50 as we are concerned that the higher cover prices might impact the circulation of Star’s newspapers. According to the Audit Bureau of Circulations Malaysia’s 1H18 audit report, The Star commands 42% of the total paid daily circulation for English newspapers, while NST and the TEFD have 8% and 1% respectively.
• We maintain our HOLD recommendation on Star as the group faces the following challenges: 1) sustained decline in print circulation following customers’ shift to digital content; 2) the challenging monetization of digital initiatives; and 3) the lack of a major growth component following Cityneon’s disposal. Moving forward, the group plans to focus on its events and exhibition segment alongside its continued focus on transforming digitally coupled with upcoming cost optimization efforts.

Source: AmInvest Research - 2 Jan 2019