Star’s FY18 revenue of RM392.7m (-24.1% YoY) translated into core earnings of RM23m (-45% YoY), beat HLIB estimates, but in line with consensus. Declared dividend of 3 sen for FY18, translating into 73% payout ratio. We raise our earnings forecast by 20-22% in FY19 and FY20 to incorporate higher contribution in the print and radio segment as well as event and exhibition segments. We maintain HOLD with a higher TP of RM0.68 (previously RM0.62), based on a higher P/NTA ratio of 0.6x

Results above. Star’s FY18 revenue of RM392.7m (-24.1% YoY) translated into core earnings of RM23m (-45% YoY), beating HLIB estimates, but in line with consensus, accounting for 159% and 98% of full year estimates, respectively. The positive surprise results was mainly due to the 1) lower finance cost 2) stronger than expected contribution from event and exhibition segment.

Dividend. Declared dividend of 3 sen for FY18, translating into 73% payout ratio.

QoQ. Overall, the group recorded marginally higher revenue of 2% to RM93m on the back of contribution across all segments, but notable contribution was witnessed in event and exhibition segment (+96%) to RM5.1m mainly from 2 events held. Despite incurring cost of RM19.9m for MSS in the print segment, the Group was still able to post higher core earnings of RM11.8m from losses of RM1.7m.

YoY. Revenue dipped 75% due to weaker contribution from segments of print (-77%) and radio (-84%) while event and exhibition grew more than double to RM5.1m Star’s core net profit was flattish at RM11.8m (+3%) owing to lower opex and lower finance cost that help to boost core earnings.

YTD. FY18 revenue declined by -24% YoY, impacted by weaker contribution from the cessation of TV segment and lower contribution from print (-38%) and radio segment (-38%). Print segment was marred by MSS cost and losses from OTT platform (dimsum). For radio segment, better cost management was able to cushion the weak adex for the traditional platform by -43%.

Outlook. We continue to be less sanguine on the group’s heavy exposure on the traditional media business. Current environment of tepid business and consumer sentiments do not serve well for the group as advertisers prefer to remain on the side line or move to the digital platforms. On a positive note, Star has a strong net cash position of RM97 (13sen/share) as at end December 2018 and offers attractive dividend yield (FY18: c.5%). In the immediate term, we expect a weaker 1Q as it is a seasonally weaker quarter for the Group.

Forecast. We raise our earnings forecast by 20-22% in FY19 and FY20 to incorporate higher contribution in the print and radio segment (on lower expenses) as well as higher contribution from event and exhibition segments.

Recommendation. We maintain HOLD with a higher TP of RM0.68 (previously RM0.62), based on a higher P/NTA ratio of 0.6x. Despite a soft 1Q ahead, we believe the group will take an initiative to further defend its bottom line through various efforts, namely further cost rationalisation and unlocking asset activity.

Source: Hong Leong Investment Bank Research - 27 Feb 2019