Star’ 4Q19 core net profit of RM2.5m (+68.9% QoQ; -70.8% YoY), brings FY19 core net profit to RM7.6m (-69% YoY). The results were slightly below our expectations (92%) but within consensus (98%). Revised our FY20-21 earnings lower by 11-16% to reflect the lacklustre event and exhibition segment. Maintain HOLD rating with lower TP: RM0.39. Our TP is based on 50% discount to FY20 NTA/share to reflect the lack of earnings catalysts.

Slightly below. Star’s 4Q19 core net profit of RM2.5m (+68.9% QoQ; -70.8% YoY) brings FY19 core net profit to RM7.6m (-69% YoY). The results were slightly below our expectations (92%) but within consensus (98%). Our FY19 core net profit is adjusted for (i) allowance to credit losses (RM1.0m); (ii) forex loss (RM306k); (iii) reversal of allowance of credit losses (RM2.2m); and (iv) loss on liquidation of a subsidiary (RM2.8m)

Dividend: Declared dividend of 2 sen per share for FY19 (FY18: 3 sen per share), going ex on 30 March 2020.

QoQ. 4Q19 revenue fell 4.4% to RM76.1m dragged by lower event and exhibition contribution by -83% to only RM934k on the back of lower events organized. Core net profit increased by 69% (from a low base) to RM2.5m, thanks to lower operating expenses that decreased by 5.1%.

YoY. In line with the 18.3% lower revenue as contributions from all segments fell, core net profit decreased to RM2.5m (-71%). In addition, higher depreciation charge by 9% also pushed core net profit lower, but this was partly cushioned by lower operating expenses by 31%.

YTD. Revenue declined by 20% from lower contribution from all segments namely print (-18%), radio (-16%) and event (-20%) given the prolonged weak adex. In turn, core net profit fell by 69% to RM7.6m, but was partly cushioned by lower operating expenses by 22%.

Outlook. We do not see an immediate turn around for the print and radio segments given soft adex sentiment. While we are positive on its digital efforts, we are cautious on earnings delivery and opine that contribution from the digital segment must accelerate due to the declining contribution from traditional media at a faster rate.

Forecast. We revised our FY20-21 earnings lower by 11-16% to reflect the lacklustre event and exhibition segment as we believe weak consumer sentiment and coupled with Covid-19 impact will drag its contribution

Maintain HOLD rating, with lower TP: RM0.39. Our TP is based on 50% discount to revised FY20 NTA/share to reflect the lack of earnings catalysts We continue to remains cautious on Star’s short to medium term outlook dragged by persistently lower adex and the strategy to focus on digital segment is yet to materialize.

Source: Hong Leong Investment Bank Research - 28 Feb 2020