Period    3Q12/9M12

Actual vs.  Expectations  The 9M12 net profit of RM110.9m came in below expectations and accounted for merely 66.1% of ours and 61.2% of the consensus' full year estimates. The main culprit was due mainly to the higher operating expenses and finance cost. 

Dividends   No dividend was announced during the quarter.

For the full financial year, we expect STAR to declare a total dividend of 18.0 sen in FY12. 

Key Result Highlights  YoY, the revenue rose by +2.5% to RM786m due to better revenue from the events division (+30.6% to RM146m) but this was partially offset by the lower print (-3.3% to RM591m) and radio (-0.6% to RM41m) divisions. The higher turnover in the events division was mainly due to the revenue growth in the interior architecture and thematic business. Meanwhile, the lower print segment revenue was mainly attributed to softer advertising revenue caused by the poor adex sentiment. The group's PBT was lower by 19.1% to RM151m as a result of higher operating expenses and losses at Li TV.     

 QoQ, the group's revenue fell by 14.4% to RM256m, no thanks to the lower performance in the print (-6.1% to RM195m) and events (-42.1% to RM44m) segments. The lower turnover coupled with a higher operating cost and effective tax rate resulted in the group's PAT falling 22.5% to RM34.3m.   

Outlook   STAR's adex outlook remains bleak in 4Q12 given that the group's gross newspaper adex has continued to fall by 11% YoY to RM77.1m in October. Meanwhile, the group also does not expect its events segment to turn around in 4Q12.   

 Post the 3Q12 results, we have lowered our FY12, FY13 and FY14 net profits by 10.2%, 4.1% and 4.4% to RM150.6m, RM171.8 and RM184.1m respectively after increasing our operating cost assumptions.  

Rating  Maintain MARKET PERFORM

 Hampered by a lack of near-term growth catalysts but the attractive dividend yield could cushion the downside risk. 

Valuation    We have lowered our TP to RM3.11 (from RM3.15 previously) based on an unchanged targeted -1SD, implying a FY13 PER of 13.4x. 

Risks   The CY13 gross adex growth coming in below our expectation of RM12.4b (+8% YoY).  

Source: Kenanga