Journey to Wealth
Star Publications - MARKET PERFORM - 25 May 2012
We attended STAR's post 1Q12 result briefing yesterday, which was led by the group's CEO and Executive Deputy Chairman. The key highlights of the meeting focused on the group's future plans as well as the rationale and key features of its newly-launched e-Paper product. Management expects its circulation number to rebound in the near term, thanks to the additional circulation figures from e-Paper, and hence hopes to boost its advertisement revenue in the next 1-2 years. Despite management painting a bullish picture of the future, we are maintaining our cautious stance on STAR judging from the unexcited outlook in Cityneon. The group is targeting to maintain its dividend amount at 18.0 sen in FY12, the same amount declared for the prior financial year, which translates into a dividend yield of 5.6%. Post result briefing, there is no change in our FY12-FY14 earnings forecasts. We maintain our STAR target price at RM3.40, based on an unchanged targeted FY13 PER of 12.9x (-1SD below the mean). Our MARKET PERFORM rating is retained as well.
Recorded 13% conversion rate on the e-Paper bundle package. This is up to 23 May, up from the 5.5k recorded in the first week of May. STAR is aiming to convert 20-30k of its current 100k printed version subscribers during the three-month promotion period. Circulation number is likely to surge in the near term. Management indicated that Audited Bureau of Circulation (ABC) has lately agreed to include e-Paper subscribers as part of the group's newspaper total circulation figure albeit it will be itemised under the printed and e-Paper categories. The move will likely boost STAR's aggregate circulation number by another 20k-30k in the near term according to management. Although the e-Paper subscribers will likely hurt the group's circulation revenue in the near term (given that the subscription fee is now at a 43.5% discount to the old subscription fee), the higher circulation numbers will likely stimulate STAR's advertising revenue in the long run as advertisers will tend to advertise more should a media channel is able to attract more readers/viewers/subscribers.
Eyeing event companies for Cityneon. STAR, as a content provider, is currently eyeing 1-2 event companies to fill the missing gap given that the latter is merely just an event contractor. Should an event company come into the picture, it will allow Cityneon to have a better competitive edge as compared to its peers.
Targeting to spend RM30m to launch mobile advertising by duplicating Joors' business model. Joors, of which STAR has a 15% equity stake in and is based in Sweden, is a digital media channel that allows advertisers to target a wide and yet very specific audience, where it no longer matters which website, search engine or social-networking service that the target audience is using. No financial target has been provided here by the group as it is still in the preliminary stage.
Source: Kenanga
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