-  We re-affirm our BUY recommendation on Star Publications, with an unchanged fair value of RM3.10/share based on a 10% discount to our DCF valuation.

-  Star reiterates its intention of expanding its non-print businesses, particularly the digital and TV segments, in its continuing bid to reduce its reliance on print.

-  It has recently acquired a 90% stake in Ocision Sdn Bhd, which owns 3 online portals, namely iBilik.com, Propwall.com and Carsifu.com.

-  Propwall.com will bolster the group to become one of the top 3 property classified portal providers in Malaysia, whereas iBilik.com would position the group as the leader in short term stay and room classified space in the country.

-  Moving forward, we believe the acquisition would create a platform for Star to compete effectively in the digital space for classified adex revenue against the likes of iProperty, as the contribution from its “Classified” section in the print segment has been on a declining trend.

-  Management has also highlights the vast opportunities in the TV segment, where the group will continuously seek potential targets such as LiTV for strategic acquisitions. LiTV is expected to breakeven in FY14F.

-  Cityneon is currently undergoing a reorganisation by aligning its effort to grow its interior design business, instead of the exhibition business, which is seen to be declining.

-  Management indicates that Cityneon has recently closed 2 major deals in China, which should contribute positively to its earnings, although it is unable to divulge any further details to the deals at the moment.

-  Full-year contribution from I.Star Factory will be reflected from this year onwards. We have maintained our PBT assumption of RM10mil-RM15mil for FY13F-FY15F from the “Perfect Livin” and “Perfect Lifestyle” events.

-  Star currently holds a newsprint inventory of 16 months, at an average cost of USD650/MT, which effectively insulates it from any price fluctuations in the near term. It aims to reduce its stockpile to 12 months.

-  Management expects DPS to be maintained flat at 18.0sen, in line with its historical payout. This equates to an attractive yield of 6%. At the current level, the stock is trading at a PE level of 13x FY13F, at parity with Media Prima’s and ahead of MCIL’s 10x.

Source: AmeSecurities