Results

• Within expectations: Star Media?s FY16 revenue of RM932.1m (-8.5% yoy) translated into core earnings of RM69.9m after excluding exceptional items totalling RM40.0m. This is within our full year expectations, accounting for 97.8% but below street?s full year estimates (89.8%).

Deviations

• None.

Dividends

• Declared second interim dividend of 9 sen/share, bringing total FY16 DPS to 18sen/share. This translates to a dividend yield of 7.6% based on current share price.

Highlights

• QoQ: 4Q16 core earnings rose 81.7% to RM20.5m as it is filtered down from an increase of 60.1% in core PBT. This is mainly attributed to the turnaround of the group?s radio and event segments which was loss making in previous quarters. Star?s TV segment narrowed its loss before tax to RM0.8m (loss of RM1.8m in 2Q16) as its revenue rose 97%. However, it was offset by a decline of 26% in print segment.
• YoY: 4Q16 revenue declined 7.3% as print and radio segments declined 20.7% and 1.5%, respectively as a result of soft consumer and business sentiments. However, Star?s event segment?s revenue grew by 11.2% as the group?s thematic and Intellectual Property Rights unit generated higher revenue but was slightly offset by I.Star Ideas Factory?s lower revenue as it held only 2 shows in 4Q16 (5 shows in 4Q15). PBT however declined 21.1% mainly due to a 68.4% PBT decline in its print segment.
• YTD: FY16 revenue fell 8.5% mainly due to a decline in its print and radio segment (-15.0% and -13.1%, respectively). PBT dropped 13.8% due to a 47.2% decline in print?s PBT and a bigger loss before tax of RM2.3m in its radio segment (RM1.0m loss in FY15).
• Moving forward we expect adex to continue to be soft as poor consumer and business environment persists. In the immediate term, we expect a weaker 1Q as it is a seasonally weaker quarter however we believe it will be slightly mitigated as we expect more contribution from Cityneon.

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 are 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 - 28 Feb 2017