- We maintain our HOLD recommendation on Star Publications with a slightly higher fair value of RM2.48/share (vs. 2.45/share previously), as we tweaked our earnings to account for a hike in ad rates and the conclusion of the VSS exercise.

- During the analyst briefing, management highlighted the group’s continuous efforts on growing and diversifying its revenue stream to reduce its reliance on the traditional print business.

- Its TV segment, under LiTV, continues to be loss making and is expected to only break even in another 2-3 years as it is still undergoing gestation for its investments. To date, LiTV has a subscriber base of 3.8mil, with 15mil viewership.

- To further grow its TV business, Star has embarked on a discussion with Bloomberg TV for a possible strategic collaboration. As it is only in the initial stages, little details are available. The collaboration will be solely on a content sharing basis.

- An office building located in Section 13, Petaling Jaya, which is owned by Star is expected to be completed in 2015. The building was previously intended to be the new HQ for Star’s operations. However, the group has now decided to lease it out and is expected to generate a recurrent income of ~RM10mil from FY16 onwards.

- The group has also successfully completed its Voluntary Separation Scheme (VSS) and reduced its workforce by 60 staff members as part of its cost rationalisation exercise. A total of RM12mil was incurred for the VSS. This is expected to produce an annual cost savings of RM5mil for Star going forward.

- However, we remain cautious on the outlook on Star as we expect its core division, i.e. the print business, to continue to face headwinds, despite various efforts to boost its e-Paper subscriptions. This is due to declining readership, as well as weak sentiments in the English print segment.

- This is further worsened by the declining classified adex for print, caused by the ongoing migration to established online listing portals, such as iProperty and JobStreet.com.

- Nevertheless, we expect the share price to be well supported at the current level due to attractive dividend yields of 6%-7%. The stock currently trades at 11x of FY14 earnings, within its historical range of 8x-13x.

Source: AmeSecurities