Star's 9MFY12 earnings fell short of expectations, representing only 58%/62% of our/consensus  full-year  estimates.  The  company's 9M PATAMI sank by 19% y-o-y due  to  higher opex  and  financing  costs  incurred  during  the  period.  Hence, we are slashing  our  FY12/FY13  earnings  forecasts  by  21%/17%  respectively.  We downgrade  the  stock  to  SELL,  with  a  lower  FV  of  RM2.59  based  on  unchanged 11.7x  FY13  PER.  We  are  concern  over  its  printing  and  new  media  segment  as  thecompany is facing a  readership decline. Moreover, the newly acquired businesses are still in their gestation phase, further hurting its financial performance.

Missing  expectations.  Star's 9MFY12 earnings fell short of expectations, representing only 58%/62% of our/consensus full-year estimates. Essentially, its 9M PATAMI sank by 19%  y-o-y  due  to  higher  opex  and  financing  costs  incurred  during  the  period.  Tepid growth in revenue (+3% y-o-y) also fuelled the bottom-line decline. On a q-o-q basis, the company's  revenue/PATAMI  had  contracted  by  15%/23%  to  RM256.4m/RM34.3m respectively. Other key takeaways include:

Downgrade to SELL, FV revised to RM2.59. We are slashing our FY12/FY13 earnings forecasts  by  21%/17%  respectively  as  we  were  overly  generous  with  our  prior  margins assumptions.  We  are  concern  over  Star's printing  business  as  the  company  is  facing  a decline  in  English  readership base.  Also,  the  newly  acquired  businesses  are still  in  their gestation  phase,  suggesting  that  its  near  term  earnings  may  be  dragged  down  by  its diversification efforts. Thus, dividends payout may not be as attractive as before given the earnings  pressure  from  various  corners. We  are  downgrading  the  stock  to  SELL,  with  a revised FV of RM2.59 based on unchanged 11.7x FY13 PER.

Source: OSK