Results

9MFY13 core earnings fell by 11% to RM98.7m (13.4 sen/share), making up 73% of both ours and consensus’ estimates.

Deviations

Largely in line.

Dividends

None. Dividends usually declared in 2Q and 4Q.

Highlights

9M review… 9MFY13 revenue declined by 6% to RM736.2m mainly due to lower print advertising revenue and lessor projects undertaken by CityNeon. PBT contribution from the print division was down by 12% to RM139.0m while losses widened for both the radio and TV division.

On a brighter note, the event division posted 9MFY13 PBT of RM3.7m as opposed to losses of RM2.0m in the previous corresponding period. This was due to cost rationalisation by CityNeon and positive contribution from 9 exhibitions held by Perfect Livin’. Despite an improved 3rd quarter results, overall 9MFY13 PATAMI still fell by 11% to RM98.7m.

Quarter review… Posted strong performance in 3Q whereby revenue grew by 3%/5% YoY/QoQ to RM264.2m. All divisions posted sequential rebound in revenue, recovering well from the uncertainty effects of election. However, YoY print revenue contracted by 2% to RM190.4m. Due to higher revenue and better operating leverage, 3Q PATAMI grew by 28%/54% YoY/QoQ to RM44.0m.

Risks

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

Forecasts

Unchanged. Subject to revision after analyst briefing on 26 Nov-13.

Rating

HOLD

For the intermediate term, we see Star’s earnings being impacted by the weak Adex growth outlook, gestation period of new business ventures and cost optimisation plan. Hence, we are reiterating our HOLD call on the company.

Valuation

Target Price maintained at RM2.46 based on required dividend yield of 6.5%.

Source: Hong Leong Investment Bank Research - 21 Nov 2013