Star’s 1Q18 revenue of RM109m was translated into core earnings of RM11.6m (333.4% YoY), in line with ours and consensus expectations. Print and broadcasting continued to show disappointments in 1Q18 but these were cushioned by better cost management. We lowered our FY18-19 earnings assumptions by 2% respectively due to a minor model up keeping adjustments. We maintain HOLD rating with a lower TP of RM1.04 based on 1.0x FY19 P/NTA.

Within expectation: Star’s 1Q18 revenue of RM109m was translated into a core earnings of RM11.6m (333.4% YoY), accounting for 26% and 25% of HLIB and consensus full year estimates, respectively.

QoQ: Print and broadcasting segment continued to show disappointments, revenue declined by 13.7% to RM109m. However, a slight improvement of 1.8% in core earnings was mainly attributable to better cost management.

YoY: Star’s core net profit rose by 333.4% to RM11.6m in 1Q18 despite the 8.1% lower revenue generation. The bright spot came from previous cost saving measures (MSS/ERO) taken by the group and higher number of events held this year as compared to preceding year. The lighter cost structure has improved group’s PBT margin by 4.3ppt.

Propose disposal of Impian Ikon. Star announced a proposed disposal of its entire 51% equity stake of Impian Ikon for a cash consideration of RM5.65m, which translates to an estimated gain of RM3.37m. The group mentioned that the disposal gain will be used for working capital. We view this positively as this will add to their cash coffers for future acquisition.

Forecast. FY18-19 earnings are lowered by 2% due to a minor model up keeping adjustment. Maintain HOLD with a lower TP of RM1.04 (previously RM1.50), based on 1.0x FY19 P/NTA. The drop in our TP is largely due to the conclusion of the disposal of Cityneon whereby dividends from the disposal proceeds have been paid. We expect the structural change in the media landscape to remain a hurdle.

Source: Hong Leong Investment Bank Research - 17 May 2018