Period  4Q13/FY13

Actual vs. Expectations Star Publication (Star)’s FY13 NP of RM143m came in above our forecast but within the street estimates, at 108.2% and 102.9%, respectively. On our side, the variance was mainly due to the better-than-expected event management division’s contribution and lower operating cost.

Dividends  Declared a total DPS of 9.0 sen (including of 3.0 sen special dividend) single-tier net dividend in 4Q with an ex-date on 26 March. Its full year DPS of 15.0 sen (FY12: 18.0 sen) is below our expectation.

Key Result Highlights YoY, FY13 revenue slipped 5% to RM1.02b as a result of lower advertising revenue and lesser projects completed by its event management division (Cityneon). PBT also fell, by 26%, as a result of higher operating costs in print and new media, radio broadcasting and TV channel segments. However, the group’s event management division managed to return to profit in FY13 thanks to lower administrative expenses.

 Print and New Media segmental FY13 revenue was reduced by 5.4% to RM727m due to lower advertising revenue while PBT dropped 30% to RM192m, which we believe was caused by higher operational and administrative expenses. Radio broadcasting segment, meanwhile, saw its revenue decreasing by 4% to RM55m due to lower airtime revenue and suffered LBT of RM0.2m (vs. FY12: RM3.9m) as a result of higher advertising and promotion costs. Event division’s revenue came off by 8% to RM199m on fewer projects while PBT improved to RM11.5m (from LBT of RM9m in FY12) as a result of significant cost savings from Cityneon and increase revenue from Perfect Livin’ (FY13: RM24.3m).

 QoQ, Star’s 4Q13 turnover fell 2% due to lower contribution from all the segments except the event segment (3.4% to RM72m) driven by the Asian Youth Games 2013 and RM5m revenue contribution from Perfect Livin’.

Outlook  We remain cautious on Star’s advertising revenue 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 raised our FY14 and FY15 NP forecasts to RM117m (+3.6%) and RM152m (+1.7%) after imputing: (i) a higher event segment earnings contribution, (ii) lower operating cost assumption and (iii) some fine-tuning.

Rating Maintain UNDERPERFORM

Valuation  Following the mild earnings upgrade, we have raised our TP marginally to RM2.05 (from RM2.00 previously) based on an unchanged targeted FY14 PER of 13.0x (-1.5x SD).

Risks to Our Call Improvement in adex sentiment.

Source: Kenanga