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Monday, March 7, 2016

Brokers Report: Star Publication (M) Bhd - Dim Adex Outlook

Maintained Market Perform with unchanged Target Price (TP) of RM2.41

Star Publication (M) Bhd

We attended Star Publication (M) Bhd (STAR)’s post-4Q15 results briefing last Friday.
The key highlights of the briefing focused on: (i) dividend, (ii) adex outlook, (iii) forward business strategies, and (iv) an update on its existing businesses. The group intends to keep its annual DPS target at 18.0 sen in FY16 should its core PBT stay at the RM170m-RM190m range. Meanwhile, STAR remains hopeful on its event division and believes the recently completed exhibition rights (Victory Hills Exhibitions Ptd Ltd) could provide buffer to its earnings. Post-briefing, there are no changes to our FY16FY17 estimates. Our STAR’s target price remains unchanged at RM2.41, based on a targeted FY16E PER of 13.5x (-1.0x SD below its mean). Maintained MARKET PERFORM for its decent dividend yield.  

Dividend aspiration.

STAR is aiming to maintain its FY16E DPS at 18.0 sen if the core PBT is sustained at the RM170m-RM190m range, a similar quantum in the past two financial years. STAR distributed an annual DPS of 18.0 sen each in FY14 and FY15, representing c.95.2% and 99.9% payout, respectively. With no exceptional item expected to arise, the market is targeting the group to achieve RM173m PBT in FY16 with a total annual DPS of 17.3 sen. Similarly, we also targeted a comparable PBT of RM175m with a total annual DPS of 18.0 sen in FY16. 

Challenging adex outlook remains.

The political uncertainties, diminished property launches and several protests that occurred in 3Q15 have led advertisers scaling back their adspend, where the group’s print advertising revenue dipped by 9.0% YoY to RM542m in FY15. Moving forward, STAR remains cautious on the adex outlook for CY16 in view of the softened economic environment, weaker Ringgit, and the prolonged poor consumer spending on the back of rising living cost. Despite the challenging adex outlook, the group intends to continue enhancing its media platforms to extend their reach to wider audiences (by providing more bundled products and creative buys to advertisers) and expand aggressively into the digital businesses in video content (TheStarTV) and Audience Interest Marketing (AIM). With the above-mentioned efforts, management hopes to achieve a low single digit adex growth (vs. our flattish growth assumptions) in FY16.    

Strategic priorities for 1H16.

The group has outlined its priority tasks for 1H16, which includes: (i) expanding digital platform e.g. StarTV, while continuing to strengthen the print segment, (ii) stepping up more bundled offerings and creative buys to lure more advertisers to promote their products in the front page, (iii) continuous look-out for M&A, with focus on media-related assets and/or digital platforms. Meanwhile, STAR also hinted that some corporate exercises may involve RED & Capital FM radio stations in the coming months, where we understand management has the intention to restructure, revamp and/or dispose these assets. The group’s radio segment result continued to be disappointing in FY15, where its turnover was reduced by 5.4% YoY to RM48.6m with a LBT of RM1.08m. 

Events expansion.

Cityneon (64.1% owned by STAR) has completed the acquisition of Victory Hill Exhibitions Ptd Ltd last September, where the latter has projected to organise a minimum of three AVENGERS and TRANSFORMERS exhibitions in FY16. While STAR believes the deal could provide positive earnings contribution to Cityneon, it is reluctant to share any expectation and financial guidance at this juncture.  

Source: Kenanga Research - 07 March 2016

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