Results

1HFY13 core earnings fell by 27% to RM56.2m (7.62 sen/share), missing estimates by making up only 35% and 34% of ours and consensus’ estimates respectively.

Deviations

Due to weak Adex spending which lead to revenue shortfall, while higher expenses dragged down overall earnings.

Dividends

Net dividend of 6 sen/share declared; lower than previous corresponding period’s payout of 9 sen/share and also missing our expectations of 9 sen/share dividend. Ex-date on 25 Sep-13 and payment on 18 Oct-13.

Highlights

2Q results review… Revenue fell by 16% YoY mainly due to lower Print and Event revenue. The former was due to higher advertising revenue from Euro 2012 football competition in the previous corresponding period while the latter was affected by lower contribution from CityNeon.

QoQ, revenue grew by 14%, mainly lifted by the Event Division whereby Perfect Livin’ hosted 6 exhibitions during the quarter. The continued cautious sentiment of advertisers post-election resulted in flattish revenue for the print division while Star did not benefit much from election advertising spending.

Overall, 2QFY13 posted RM28.5m (3.87 sen/share) core earnings which fell by 35% YoY, but rebounded by 3% QoQ. Its new business ventures in the Radio and TV segment are still in the gestation period, resulting in higher overall expenses. On a positive note, Cityneon posted smaller losses in the quarter as indicated by the smaller MI reversal charge.

1HFY13 results review… Revenue fell by 11% mainly due to pullback of advertising spending in the 1Q which hit the Print division. Overall, core earnings fell by 27% due to lower revenue and higher expenses.

Risks

Weak Adex growth; High newsprint cost; Threat of new players; Depreciation of RM vs. US$; and Regulatory risk.

Forecasts

Unchanged. Subject to potential downwards revision after analyst briefing on 20 Aug-13.

Rating

HOLD

Positives: (1) Recovery in the global economy; (2) Strong domestic consumption which reinforces business confidence to spend on Adex; and (3) Quicker gestation period for its new business venture.

Negatives: (1) Weak domestic consumption; (2) Continued deterioration in the Euro debt crisis which dampens business confidence.

Valuation

TP maintained at RM2.77 based on required dividend yield of 6.5%. Subject to potential downwards revision after analyst briefing on 20 Aug-13.

Source: Hong Leong Investment Bank Research - 15 Aug 2013