INVESTMENT HIGHLIGHTS

• 1QFY19 normalised earnings of RM3.5m failed to keep pace with our and consensus expectations

• Both print and digital segment and radio segment underperformed, with the latter turned red

• Earnings revised downward for FY19, FY20 and FY21

• Expecting dividend to remain stagnant at 3sen in view of declining reserves

• Downgrade to SELL with a revised target price of RM0.54

1QFY19 earnings plunged. Star Media Group Bhd’s (Star) 1QFY19 normalised profit fell by -68.7%yoy and -48.2%qoq to RM3.5m. The earnings results was a negative surprise to our and consensus expectations as it accounted for merely 13.9% and 15.9% respectively of the full year FY19 earnings estimates. This was mainly due to the group’s poorer-than-expected revenue (-24.3%yoy, -11.3%qoq) and weaker margin (-6.1ppts yoy, -3.1ppts qoq), predominantly from its major traditional business segments.

Major business segments suffered badly. The significant fall in earnings was primarily attributed to the lower contribution from its print and digital segment in which revenue and profit before tax dropped by -22.0%yoy and -78.5%yoy to RM71.9m and RM3.6m respectively as a result of poorer market sentiment. Meanwhile, its radio broadcasting business’s recorded a loss before tax of -RM0.1m as compared to its 1QFY18 contribution of RM1.4m due to decreasing radio ad spending.

Source: MIDF Research - 17 May 2019