Investment Highlights

• We maintain our HOLD recommendation on Star Media Group (Star) with unchanged forecasts and fair value of RM0.73/share, which is pegged to a P/B multiple of 0.7x, consistent with its 1-year historical PB.

• We attended Star’s 1QFY19 analyst briefing and came away with the following key highlights:

• Star’s 3-pillar strategy moving forward:

1. Optimizing base by utilizing artificial intelligence for a more personalized customer experience and to drive engagements and conversions.

2. Leveraging analytics to observe audience behaviour for better targeted content and advertising.

3. New revenue streams aimed at increasing its transactional revenue in its digital ecosystem from ecommerce, education, food, lifestyle and property.

• Star’s decision to introduce a dynamic paywall may negatively affect Star Online’s page traffic upon introduction initially. However, a successful implementation of the paywall depends on: (i) the group’s ability to leverage its analytic capabilities to personalize users’ reading experience; (ii) the ability for its content to attract and maintain readership, and (iii) the reception of readers due to competing sites which are free.

We believe that Star would use Norway-based data management platform Cxense’s suite of tools to gain insights on how readers interact with its content on Star Online, after inking an agreement with the latter in November 2018. We await further details on the mechanism of the dynamic paywall from management.

• Updates on Star’s video-on-demand service, dimsum: Dimsum currently has 1 million subscribers and is available in Malaysia, Brunei and Singapore with a predominantly female audience. Besides its regional expansion plan, Star has also inked deals with SamsungTV and AndroidTV such as on Sharp, Toshiba and Sony brand smart TVs to have dimsum pre-loaded on these devices.

• We are fairly positive on Star’s new initiatives in store but remain skeptical due to the challenging monetization of digital initiatives seen in the industry. We believe the new revenue streams would not materially impact our earnings forecasts and thus, keep our near-term forecasts unchanged.

• We reiterate our HOLD recommendation on Star as we believe its lacklustre prospects have been fairly valued at the current price. Star’s lacklustre prospects arise from: (i) concerns that its digital and events & exhibition segment will have slower-than-expected progress in offsetting the decline in traditional media; (ii) difficulties in monetizing digital initiatives; and (iii) the lack of a major growth component following the group’s disposal of Cityneon in 2017.

Source: AmInvest Research - 14 Jun 2019