We attended Star‟s 1QFY14 results briefing yesterday, conducted by Datuk Seri Wong Chun Wai (Group MD/CEO), Ragesh Rajendran (CFO), Kudsia Kahar (Deputy Chief Broadcasting Officer) and Timothy Hor (GM, Digital). Despite the disappointing 1QFY14 results, Management is optimistic that it can deliver better results going forward by embarking on various initiatives and looking for opportunities beyond print. We maintain our Outperform call on Star with a TP of RM2.91.

Disappointing 1QFY14 but better quarters are expected moving forward. The Group acknowledged their weaker 1QFY14 results, primarily due to a one-off Voluntary Separation Scheme (VSS) amounting to RM9.58m and seasonality effect, which dampened its advertising revenue contribution despite achieving higher print circulation. Management is however optimistic in delivering better results in the coming quarters attributed to: i) higher adex contribution towards its print and broadcasting segments from the FIFA World Cup 2014, ii) Star‟s e-paper circulation which has commanded c.80,000 subscribers to-date, and expects to achieve 100,000 subscribers in the next three months, iii) better contributions from its event, exhibition, interior and thematic segment as more exhibitions are being planned in CY14 and CY15, among others on parenting, hobbies, education and private and international schools.

New revenue streams. i) Star has just received approval from SPAD (Land Public Transport Commission) for the advertising rights on school buses, which opens up a whole new “space” of c.16,000 school buses in Peninsular Malaysia of which the Group can capitalize on, ii) collaboration with Bloomberg TV on content sharing. While we view these developments positively, we have not accounted for it in our estimates as they are still at very preliminary stages and contributions should be negligible, for now.

Dividend. Management is likely to maintain its dividend payment of 15sen this year which is slightly higher than our estimates, translating to an attractive dividend yield of 5.7%.

Maintain Outperform with a TP of RM2.91. We reiterate our Outperform call on Star with a TP of RM2.91 premised on its: i) various initiatives through strategic partnerships which involve leveraging on their platform, ii) expansion in the digital space, iii) on-going efforts in cost cutting measures especially in addressing issues at its Sarawak plant.

Source: PublicInvest Research - 3 Jun 2014