STAR (FV RM3.33 - NEUTRAL) FY11 Results Review: Print Revenue Misses a Beat

Star’s FY11 results were largely within our and consensus  estimates,  with core earnings  representing 103% and 105% of both forecasts  respectively. The group announced a second interim DPS of 6.0 sen and a special tax-exempt 3.0 sen dividend. While Star’s y-o-y adex growth of 1.8% fell short of our estimated 3%, we are tweaking up our FY12 earnings by a slight 2.4% as we believe the upcoming adex-friendly global sporting events will boost overall adex growth. Our FV is nowRM3.33, based on an unchanged 13x FY12 PER. Maintain NEUTRAL.

Within estimates.  Star’s FY11 revenue and earnings of RM1.07bn and RM186.7m respectively were largely in line with our and consensus expectations, representing 103% of our FY11  full year  forecast. Its core print media segment registered subpar performance, as  revenue fell 8% y-o-y to RM210.6m, which we attribute to its shrinking readership base. On the  other hand, its radio unit and events and exhibition (EEIT) segments chalked  up  decent growth of 31% and 6% y-o-y respectively, largely contributed due to better adex share from 988 and Suria FM and interior design works undertaken at  Resort World Sentosa in Singapore. On a quarterly basis, 4QFY11 revenue and net earnings both jumped 24% q-o-q owing to the year-end festive seasons and resilient consumer spending, which continued to spur adex.

Still generous on dividend. The group declared a second interim DPS of 6.0 sen and a special tax-exempt DPS of 3.0 sen, bringing its  FY11 DPS to  18.0 sen. This implies a payout ratio of over 70%, which translates into a healthy dividend yield of 5.5%.  After paying out the dividend of 9.0 sen  (to be paid out  on  28 Mar 2012), Star’s net cash should stand at RM427.2m, with its net cash per share at RM0.58. Given its huge cash pile, we are positive  on the group’s dividend payout going forward, and continue to forecast a 75% payout ratio for FY13.

Revising forecasts. We believe the two upcoming adex-friendly events such as the 2012 Olympics and Euro 2012 football tournament will boost adex growth in Malaysia’s media sector. As such, we see 2012 adex growth ending at 2x our 2012 in-house GDP forecast of 5.2%. That said, we are revising our assumptions on Star’s adex share for FY12, which leads to our earnings forecast  being adjusted slightly upwards by 3%. We also take this opportunity to introduce our FY13 numbers,  which reflect softer revenue and earnings y-o-y growth of 3.0% and 2.2% respectively.

Maintain NEUTRAL.  Our forecast  revision leads to an  FV  of  RM3.33, versus  RM3.23 previously, based on an unchanged 13x FY12 PER.  We maintain our NEUTRAL call given the limited  price  upside, pending confirmation on  the utilization of the proceeds from the group’s proposed RM750m debt raising exercise.

Source: OSK188