Period  3Q13/9M13

Actual vs. Expectations Star Publication (Star)’s 9M13 NP of RM98.7m came in slightly above our but within the street estimates, accounting for 79.5% and 73.3% of full-year estimates, respectively. On our side, the variance was mainly due to its better-than-expected event segment contribution and lower operating cost.

Dividends  No dividend was declared during the quarter. For the full financial year, we expect Star to declare 15.0 sen DPS, translating into 6.9% dividend yield.

Key Result Highlights YoY, Star’s 9M13 revenue slipped 6% to RM736m as a result of lower advertising revenue and lesser projects completed by its event management division (Cityneon). Its PBT, meanwhile, also fell by 10%, as a result of higher operating costs in print and new media, radio broadcasting and TV channel segments.

 Print and New Media segment’s 9M13 revenue was reduced by 6% to RM558m due to lower advertising revenue while PBT dropped 12% to RM139m, which we believe was caused by higher administrative expenses. Radio broadcasting segment, meanwhile, saw its revenue decreasing by 4% to RM39m due to lower airtime revenue and suffered LBT of RM2.5m (vs. 9M12: -RM1m) as a result of higher advertising and promotion costs. Event division revenue came off by 13% to RM126m due to lesser projects while PBT improved to RM3.7m (from LBT of 2m in 9M12) as a result of significant cost savings from Cityneon.

 QoQ, Star’s 3Q13 turnover improved by 3% due to better event segment contribution led by higher projects secured and favourable exchange rate. Note that, SGD has appreciated 3.9% against the Ringgit in 3QCY13. PBT improved by 36% largely due to the lower operating expenses incurred and significant costs saving from Cityneon, strengthening the margin to 21.2% from 16.4% in the prior quarter.

Outlook  We remain cautious on Star’s advertising outlook in view of its lacklustre circulation growth in the English segment and ongoing print-to-online migration. Its event division contribution, however, remains a wildcard to the group’s earnings.

Change to Forecasts We have raised our Star’s FY13 and FY14 NP forecasts to RM133m (+7.1%) and RM139m (+2.6%) after imputed: (i) a higher event segment earnings contribution, (ii) lower administrative expenses, and (iii) fine-tuning.

Rating Maintain MARKET PERFORM

Valuation  Following the mild earnings upgrade, we have raised our TP marginally to RM2.48 (from RM2.46 previously) based on an unchanged targeted FY14 PER of 13.2x (-1.5x SD).

Risks to Our Call  Poor adex sentiment.

Source: Kenanga