8/7/2019 Star 20110405 MIB

http://slidepdf.com/reader/full/star-20110405-mib 1/3

Company Update 5 April 2011

Maybank IB ResearchPP16832/01/2012 (029059)

The RM750m question

Proposes major debt raising exercise. Star proposes to raise up to

RM750m via a 7- and 15-year debt programme. It is unlikely to pay

more special dividends or develop its Section 13 land by itself but

rather, embark on M&As with the proceeds, we think. We leave our

earnings estimates unchanged for now. We also maintain our Hold call

and RM3.71 target price pending a major earnings accretive M&A.

RM750m credit line. Star proposes to establish a commercial paper

(CP) and medium term note (MTN) programme with a combined limit of

RM750m. The CP programme will have tenure of seven years from the

date of first issue whilst the MTN programme will have tenure of 15

years from the date of first issue. According to the Bursa Malaysiaannouncement, the proceeds will be utilised for investments, capex,

working capital and general corporate expenses.

RM1b for M&A? We understand that the proceeds are unlikely to be

used to pay another special dividend (recall that 40.6 sen net DPS was

paid on 30 Nov 2010) or develop its Section 13 land by itself (recall that

JAKS Island Circle will develop the land and Star will receive office

units worth at least RM111m). Rather, we think that the proceeds will

be utilised for M&A. Coupled with an estimated RM270m net cash by

year end, Star will have RM1b cash if it draws down the full RM750m.

Maintaining earnings estimates for now. Assuming the full RM750m

is drawn down without a corresponding new earnings source or M&A,and a 5% coupon rate, the negative carry to our FY11 net profit

estimate will be RM28.1m or 14%. That said, we understand that there

is no fixed timeline for the draw down. Therefore, we leave our earnings

estimates unchanged for now. Gross gearing will rise to 84% from 9%

as at 31 Dec 2010, assuming a full draw down.

Maintain Hold and RM3.71 target price. Given Star’s uninspiring M&A

track record (e.g. 64% owned Cityneon Holdings), we are lukewarm on

the CP and MTN programme. Our target price is DCF based but

excludes net cash per share of RM0.36. Should Star utilise its net cash

constructively (e.g. M&A), the market will likely add back this net cash – 

even more should a major earnings accretive M&A materialise. Wewould be compelled to re-rate up our call then. 

Star Publications (Malaysia) – Summary Earnings TableFYE Dec (RM m) 2009A 2010A 2011F 2012F 2013FRevenue 973.9 1,061.7 975.0 994.9 1,015.2

EBITDA 265.8 320.3 313.1 329.4 340.7

Recurring Net Profit 144.7 184.9 199.3 213.4 223.9Recurring Basic EPS 19.6 25.0 27.0 28.9 30.3

EPS growth (%) (11.3) 27.8 7.7 7.1 4.9

DPS (Sen) 21.0 72.1 20.6 22.0 23.1

PER 17.8 13.9 12.9 12.0 11.5

EV/EBITDA (x) 7.9 7.6 7.3 6.7 6.2

Div Yield (%) 6.0 20.7 5.9 6.3 6.6

P/BV(x) 2.0 2.5 2.4 2.2 2.1Net Gearing (%) Cash Cash Cash Cash Cash

ROE (%) 11.7 16.3 19.1 19.0 18.6

ROA (%) 8.1 11.6 14.6 15.2 15.1Consensus Net Profit  - - 194.4 209.8 227.8 

Source: Maybank IB 

Star Publications(Malaysia)

Hold (unchanged) 

Share price: RM3.48Target price: RM3.71(unchanged) 

Yin Shao Yangsamuel.y@maybank-ib.com(603) 2297 8916

Description: Newspaper publishing, radio broadcasting and

exhibition services.

Information:Ticker: STAR MKShares Issued (m): 738.6Market Cap (RM m): 2,570.23-mth Avg Daily Volume (m): 0.27KLCI: 1,555.48

Major Shareholders: %Malaysian Chinese Association 42.4EPF 14.1Skim Amanah Saham 8.0

Price Performance:52-week High/Low RM4.15/RM3.22

1-mth 3-mth 6-mth 1-yr YTD(2.8) 3.9 5.5 3.9 5.1

Price Chart (RM3.48)

3.2

3.3

3.4

3.5

3.6

Nov-10 Dec-10 Jan-11 Feb-11 Mar-11

STAR MK Equity

 

8/7/2019 Star 20110405 MIB

http://slidepdf.com/reader/full/star-20110405-mib 2/3

 

Star Publications (Malaysia)

5 April 2011 Page 2 of 3

Table 1: DCF valuationRMm RM/share Comments

Print & radio 2,564.2 3.47 DCF @ 10.5%

Net cash 269.2 0.36

Cityneon Holdings 48.6 0.07 64.1% shareholding at SGD0.36/share

Associates & JVs 16.5 0.02 End-FY11 BV

Section 13 industrial building and land 22.7 0.03 End-FY11 BV

Others 87.3 0.12 End-FY11 BVTotal 3,008.5 4.07

Less: Discount (net cash) (0.36)

Target price 3.71

Source: Maybank-IB  

INCOME STATEMENT (RM m) BALANCE SHEET (RM m)

FY Dec 2010A 2011F 2012F 2013F FY Dec 2010A 2011F 2012F 2013F

Revenue 1,061.7 975.0 994.9 1,015.2 Fixed Assets 596.3 575.4 556.4 539.4

EBITDA 320.3 313.1 329.4 340.7 Other LT Assets 121.0 116.0 110.9 105.6

Depreciation & Amortisation (48.2) (45.9) (43.9) (42.0) Cash/ST Investments 216.7 311.3 400.9 491.8

Operating Profit (EBIT) 272.0 267.2 285.5 298.7 Other Current Assets 429.8 367.6 372.1 378.3Interest (Exp)/Inc (6.9) 5.2 5.8 6.8 Total Assets 1,363.7 1,370.2 1,440.4 1,515.2

Associates (6.3) (5.0) (5.1) (5.3)

One-offs - - - - ST Debt 53.1 12.6 13.6 14.6

Pre-Tax Profit 258.8 267.5 286.2 300.2 Other Current Liabilities 154.0 138.7 140.4 142.9

Tax (68.6) (66.9) (71.6) (75.1) LT Debt 42.1 29.5 16.9 4.3

Minority Interest (5.2) (1.3) (1.3) (1.3) Other LT Liabilities 79.0 79.0 79.0 79.0

Net Profit 184.9 199.3 213.4 223.9 Minority Interest 27.3 28.7 30.0 31.3

Recurring Net Profit 184.9 199.3 213.4 223.9 Shareholders' Equity 1,008.2 1,081.8 1,160.5 1,243.1

Total Liabilities-Capital 1,363.7 1,370.2 1,440.4 1,515.2

Revenue Growth % 9.0 (8.2) 2.0 2.0

EBITDA Growth (%) 20.5 (2.2) 5.2 3.4 Share Capital (m) 738.6 738.6 738.6 738.6

EBIT Growth (%) 25.1 (1.8) 6.8 4.6 Gross Debt/(Cash) 95.1 42.1 30.5 18.9

Net Profit Growth (%) 27.8 7.7 7.1 4.9 Net Debt/(Cash) (121.6) (269.2) (370.4) (472.9)

Recurring Net Profit Growth (%) 27.8 7.7 7.1 4.9 Working Capital 439.4 527.6 619.1 712.7Tax Rate % 26.5 25.0 25.0 25.0

CASH FLOW (RM m) RATES & RATIOS

FY Dec 2010A 2011F 2012F 2013F FY Dec 2010A 2011F 2012F 2013F

Profit before taxation 258.8 267.5 286.2 300.2 EBITDA Margin % 30.2 32.1 33.1 33.6

Depreciation 48.2 45.9 43.9 42.0 Op. Profit Margin % 25.6 27.4 28.7 29.4

Net interest receipts/(payments) 10.4 (8.5) (9.2) (10.2) Net Profit Margin % 17.4 20.4 21.4 22.0

Working capital change (131.5) 47.3 (3.9) (4.5) ROE % 16.3 19.1 19.0 18.6

Cash tax paid (64.4) (67.3) (70.5) (74.3) ROA % 11.6 14.6 15.2 15.1

Others (incl'd exceptional items) (10.6) 5.0 5.1 5.3 Net Margin Ex. El % 17.4 20.4 21.4 22.0

Cash flow from operations 111.0 289.9 251.6 258.5 Dividend Cover (x) 0.4 1.6 1.6 1.6

Capex (27.8) (25.0) (25.0) (25.0) Interest Cover (x) 39.4 (51.2) (48.8) (44.2)

Disposal/(purchase) (6.0) - - - Asset Turnover (x) 0.8 0.7 0.7 0.7

Others 16.4 10.8 11.2 11.5 Asset/Debt (x) 14.3 32.6 47.2 80.1

Cash flow from investing (17.4) (14.2) (13.8) (13.5) Debtors Turn (days) 65.3 65.3 65.3 65.3

Debt raised/(repaid) (203.3) (53.1) (11.6) (11.6) Creditors Turn (days) 64.2 68.4 68.4 68.4

Equity raised/(repaid) - - - - Inventory Turn (days) 72.4 103.6 103.6 103.6

Dividends (paid) (427.4) (125.7) (134.6) (141.3) Net Gearing % Cash Cash Cash Cash

Interest payments (7.7) (2.4) (1.9) (1.3) Debt/ EBITDA (x) 0.3 0.1 0.1 0.1

Others (1.1) - - - Debt/ Market Cap (x) 0.0 0.0 0.0 0.0

Cash flow from financing (639.5) (181.2) (148.1) (154.1)

Change in cash (545.9) 94.6 89.6 90.9

Source: Company, Maybank IB  

8/7/2019 Star 20110405 MIB

http://slidepdf.com/reader/full/star-20110405-mib 3/3

 

Star Publications (Malaysia)

5 April 2011 Page 3 of 3

Definition of Ratings

Maybank Investment Bank Research uses the following rating system:

BUY Total return is expected to be above 10% in the next 12 months

HOLD Total return is expected to be between -5% to 10% in the next 12 months

SELL Total return is expected to be below -5% in the next 12 months

Applicability of RatingsThe respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings areonly applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do notcarry investment ratings as we do not actively follow developments in these companies.

Some common terms abbreviated in this report (where they appear):Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings

BV = Book Value FV = Fair Value PEG = PE Ratio To Growth

CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio

Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter

CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset

DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On EquityDPS = Dividend Per Share NTA = Net Tangible Asset ROSF = Return On Shareholders’ Funds 

EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of CapitalEBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year

EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-DateEV = Enterprise Value PBT = Profit Before Tax

Disclaimer

This report is for information purposes only and under no circumstances is it to be considered or intended as an offer to sell or a solicitationof an offer to buy the securities referred to herein. Investors should note that income from such securities, if any, may fluctuate and that eachsecurity’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamentalratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based onprice and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.   Accordingly, investors mayreceive back less than originally invested. Past performance is not necessarily a guide to future performance. This report is not intended toprovide personal investment advice and does not take into account the specific investment objectives, the financial situation and theparticular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regardingthe appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.

The information contained herein has been obtained from sources believed to be reliable but such sources have not been independentlyverified by Maybank Investment Bank Bhd and consequently no representation is made as to the accuracy or completeness of this report byMaybank Investment Bank Bhd and it should not be relied upon as such. Accordingly, no liability can be accepted for any direct, indirect orconsequential losses or damages that may arise from the use or reliance of this report. Maybank Investment Bank Bhd, its affiliates andrelated companies and their officers, directors, associates, connected parties and/or employees may from time to time have positions or bematerially interested in the securities referred to herein and may further act as market maker or may have assumed an underwritingcommitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other servicesfor or relating to those companies. Any information, opinions or recommendations contained herein are subject to change at any time,without prior notice.

This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”,“believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”,“should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptionsmade and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differmaterially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on thes e forward-looking statements. Maybank Investment Bank Bhd expressly disclaims any obligation to update or revise any such forward lookingstatements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated

events.This report is prepared for the use of Maybank Investment Bank Bhd's clients and may not be reproduced, altered in any way, transmitted to,copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MaybankInvestment Bank Bhd and Maybank Investment Bank Bhd accepts no liability whatsoever for the actions of third parties in this respect.

This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in anylocality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Published / Printed by

Maybank Investment Bank Berhad (15938-H)  (A Participating Organisation of Bursa Malaysia Securities Berhad)

33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888; Fax: (603) 2078 4194

Stockbroking Business:

Level 8, Tower C, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888; Fax: (603) 2282 5136

http://www.maybank-ib.com