• Star’s 2020 revenue declined by 37.8% yoy to RM196.4m and posted a core net loss of RM58.7m (vs core net profit of RM7.1m in 2019) as all segments were impacted by Covid-19. However, revenue has gradually improved vs 3Q20
• We make no changes to our 2021-22E earnings forecasts and introduce our 2023E forecasts
• Maintain SELL With An Unchanged 12-month Target Price of RM0.27

Losses Narrowed Qoq to RM5.9m

Sequentially, Star Media Group (Star) 4Q20 revenue increased by 5.7% qoq to RM50.9m given the increase in business activities during the quarter. However, Star reported a LBT of RM19.2m (due to impairment on PPE) vs a PBT of RM33.1m in 3Q20 (due to the recognition of compensation income of RM50.5m for the late delivery of vacant possession of its investment property under construction). Excluding the one-offs, Star’s core net loss narrowed to RM5.9m in 4Q20 from core net loss of RM22.9m in 3Q20.

2020 Core Net Loss at RM58.7m

Star’s 2020 revenue was lower by 37.8% yoy to RM196.4m due to weaker contribution across print & digital, radio broadcasting and event & exhibition segments. Revenue from all three main segments were adversely impacted by the Covid-19 pandemic as many advertisers were still cautious on ad spending for other business priorities and cancellation of events. For 2020, Star posted a LBT of RM16.5m as compared to PBT of RM14.6m in 2019. After excluding one-off items, Star’s core net loss was at RM58.7m as compared to core net profit of RM7.1m in 2019. The results were largely within our expectations.

Maintain SELL Rating With An Unchanged TP of RM0.27

We make no changes to our 2021-22E earnings forecasts and introduce our 2023E forecasts. Our 12-month target price for Star is unchanged RM0.27, based on a 2021E PBR of 0.25x. Maintain our SELL rating on the stock. It has been a challenging year for the media industry due to the Covid-19 pandemic but the Group has embarked on various cost cutting measures and restructuring some of the business units to re-strategize operations to cushion some of the impact. Despite this, we continue to expect the group to post losses in 2021E and see limited re-rating catalyst for the stock. Key risks to our call include i) major restructuring plans that would improve its long-term prospects, ii) sharp improvement in adex revenue, iii) substantial increase in hard-copy newspaper circulation and iii) higher-than-expected earnings contribution from the digital and nonprint segment.

Source: Affin Hwang Research - 26 Feb 2021