Highlights

• We went to Singapore’s Science Center last week to visit the newly launched Marvel’s Avengers S.T.A.T.I.O.N. exhibition followed by a meeting with management of Star and VHE (Victory Hill Exhibitions).

• The exhibition in Singapore costs S$30 per adult, S$22 per child and a Family Package option for 2 adults and 2 children for S$83. To get the full interactive Avenger’s recruitment experience, where visitors create their own agent profiles and answer quizzes, patrons have an option to download the app for the exhibition or rent an iPod for S$5 instead. The whole exhibition takes around an hour to complete and patrons are given the choice to print a personalised Avenger’s Agent ID card, photos and certificate for S$10-S$18 each or S$45 for the full package.

• Apart from its travelling set in Singapore, VHE is currently operating its Marvel’s permanent set in Las Vegas. The travelling sets will last circa 4 months before travelling to another location. The company remains focused on expanding and capturing audiences from Australia, Europe, Middle East and China.

• Moving on from the exhibition, Star has come up with its second effort in digital transformation through its new video on demand service, Dimsum.

• Dimsum will be offering exclusive Asian content, with its content library at 10,000 screening hours and growing. Dimsum will offer asian dramas, daily news, reality shows, news in Chinese, Malay and English languages as well as kids’ educational content, all in HD. The group plans on taking advantage of The Star’s 1.5m urban readership base. They will also be offering simultaneous cast as the origin country for some of the series. Dimsum will cost RM15 per month allowing up to 5 concurrent users.

• We remain positive on Cityneon’s contribution through its Avengers and Transformers exhibitions. We are neutral on the recent development of Dimsum as we expect earnings contribution to be minimal for the near term. However, we believe it is a step in the right direction in embracing the digital era.

Risks

• (1) Not getting new IP Rights; (2)Weak Adex growth; (3)High newsprint cost; (4) Threat of new players; (5) Depreciation of RM vs. US$; and (6)Regulatory risk;

Forecasts

• Unchanged.

Rating

HOLD (↔)

• For the immediate term, we see Star’s earnings being affected by cautious Adex growth outlook caused by weak consumer sentiment and sluggish economy. Nevertheless, we begin to turn more positive on the contribution from Cityneon, reinforced by its healthy balance sheet and net cash position.

Valuation

• We retain our HOLD call with TP of RM2.50 based on unchanged targeted dividend yield of 6%.

Source: Hong Leong Investment Bank Research - 8 Nov 2016