Results

FY13 core earnings dipped slightly by 2% to RM142.9m (19.36 sen/share), exceeding our estimates slightly by making up 106% of full year forecast but meeting consensus’ estimates by making 103% of forecast.

Deviations

Mainly due to better Event division contribution.

Dividends

Net dividend of 9 sen/share declared, matching 4QFY12’s payout. Hence, bringing full year dividends declared to 15 sen/share which is 1 sen higher than our dividend forecast. Ex-date on 26 Mar-14, payment on 18 Apr-14.

Highlights

4Q review… 4Q revenue shrank by 2% YoY to RM289.2m mainly due to a drop in Print Adex. However, the impact was mitigated by the Event division which benefitted from turnaround in CityNeon’s operations. Overall, despite the decline in revenue, 4Q core earnings grew by 26% YoY to RM44.2m (5.99 sen/share) due to better cost control.

QoQ, revenue rebounded by 9%, with PBT also growing by 8%, however due to higher effective tax rate of 26% compared to 22% in the previous quarter, sequential earnings growth was flat.

FY13 review… Revenue declined by 5% to RM1.03bn, due to lower advertising revenue from the Print and Radio divisions coupled with lessor projects undertaken by CityNeon. Overall, core earnings dipped slightly by 2% to RM142.9m (19.36 sen/share).

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 6 Mar-14.

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 RM2.15 based on required dividend yield of 6.5%. Subject to revision after analyst briefing on 6 Mar-14.

Source: Hong Leong Investment Bank Research- 28 Feb 2014