Star’s 4Q20 core loss of -RM18.8m (3Q20: -RM21.4m; 4Q19: RM2.5m) brought FY20 sum to -RM70.3m (FY19: RM7.6m ). The results were within our expectations but below consensus at -RM72.6m and -RM63.8m respectively. Despite the growth of digital revenue +17% YoY, we are still cautious on its overall earnings delivery as the traditional media contribution is falling at a faster rate. We remain cautious on its DimSum OTT and opine that business plan reinvigoration is required to monetize this venture. Maintain HOLD rating with unchanged TP of RM0.32, based on a P/NTA ratio of 0.35x pegged to FY21 NTA/share.

Matched ours but below consensus. Star’s 4Q20 core loss of -RM18.8m (3Q20: - RM21.4m; 4Q19: RM2.5m) brought FY20 sum to -RM70.3m (FY19: RM7.6m). The results were within our forecast (-RM72.6m) but below consensus (-RM63.8m) respectively. FY20 sum is adjusted for the recognition of compensation income for the late delivery of vacant investment property under construction by Jaks amounting to RM50.5m and other minimal adjustments of RM87k.

Dividend. None declared. (FY19: 2 sen per share).

QoQ. 4Q20 revenue rose by 5.7% to RM50.9m. This was on the back of the loosening of restrictions during CMCO that helped boost the print (+2.8%) and radio segment (+12.7%). Subsequently, core loss narrowed to -RM18.8m from -RM21.4m.

YoY. Top line declined by -33.0% owning to the downturn in print (-35.2%), radio (- 12.7%) and event (-32.0%). Coupled with higher opex, core loss of -RM18.8m was recorded (vs 4Q19: RM2.5m).

YTD. With top line reduction by -37.8% to RM196.4m, bottom line registered loss of - RM70.3m vs profit of RM7.6m in SPLY. Event segment took the biggest hit with revenue plunging by -73.4% due to the “non-social distancing” nature of this business in this pandemic.

Outlook. Management are clinging to the hope for digital contributions to still be the main driver for Star’s growth, with focus on new technologies and improvement in analytics. Despite the growth of digital revenue +17% YoY, we are still cautious on its overall earnings delivery as the traditional media contribution is falling at a faster rate. We remain cautious on its DimSum OTT and opine that business plan reinvigoration is required to monetize this venture. On the other hand, we opine adex spending will be positive YoY due to low base effect coupled with lower cases of late and firmer vaccine rollout timeline.

Forecast. Unchanged as Results Are in Line.

Maintain HOLD, TP: RM0.32 pegged to P/NTA multiple of 0.35x (roughly -1.7SD below 3-year mean), pegged to FY21 NTA/share. The outlook for Star remains bleak due to the Covid-19 pandemic coupled with the bumpy road ahead to materialize their digital revenue in this challenging economic outlook. Nonetheless, share price is already below its NCPS of RM0.48. Maintain HOLD with unchanged TP of RM0.32

Source: Hong Leong Investment Bank Research - 26 Feb 2021