KUALA LUMPUR: Star Publications (M) Bhd is believed to be in talks to acquire an American asset that is complementary to the group’s current businesses. This could likely be in the events and exhibition industry, said sources.
“The potential acquisition could be undertaken by one of the two companies that Star Publications currently owns in that (events and exhibition) industry,” a source told The Edge Financial Daily.
Star Publications’ subsidiary in Singapore — Cityneon Holdings Ltd — and I.Star Ideas Factory Sdn Bhd are both in the events and exhibition industry.
Star Publications (fundamental: 2.5 ; valuation: 1.2) has a 64% stake in Singapore-listed Cityneon — a stake it had acquired in November 2008 through a takeover bid. Cityneon is Star Publications’ first venture into the events and exhibition industry. The company specialises in providing creative solutions in interior architecture, events, exhibitions and experiential environment.
I.Star, meanwhile, is a home and lifestyle exhibition business that was acquired by Star Publications in 2012. There is a profit before tax guarantee of at least RM30 million tied to the deal for three years following the agreement’s completion date.
It is no secret that Star Publications is diversifying its income to ensure that it is not fully reliant on the print media business.
According to its financial report ended Dec 31, 2014, the group’s net cash position was RM352 million.
Meanwhile, the group’s event management, exhibition services and thematic business is slowly starting to make money.
The segment made a profit of RM11.8 million for the financial year ended Dec 31, 2013 (FY13) compared with a loss of RM8.6 million in FY12. The earnings of RM11.8 million translates into a 6.25% contribution to Star Publications’ consolidated profit of RM188.5 million.
It is the only business segment making profits after the group’s business segment of print and digital that year.
In its latest financial results (FY14), Star Publications’ event management, exhibition services, interior and thematic business saw its revenue rise to contribute 23% to the group’s total revenue of RM1.01 billion compared with a 19.4% contribution in FY13. The segment registered revenue of RM235.5 million in FY14.
In a March 2, 2015 report, AmResearch noted that Star Publications’ FY14 core net profit declined by 3% year-on-year (y-o-y) largely due to lower advertising expenditure, as the protracted weak consumer sentiment caused by the uncertainties in the economy and airline tragedies during the year had caused advertisers to be more cautious and hold back on its advertising expenditures.
“However, this was partially offset by stronger earnings for its event and exhibition segment, which consists of Cityneon and I.Star. The segment’s PBT (profit before tax) improved by 65% to RM19 million mainly due to more projects secured by Cityneon and two additional Perfect Livin’ exhibitions held (by I.Star) during the year.
“Cityneon also saw improved margins due to better cost control by its management,” said the research firm.
“While we remain positive on Star Publications’ many initiatives to reduce its dependency on income generated from its print business, these initiatives are unlikely to contribute meaningfully in the near term, in our opinion,” AmResearch added.
For FY14, Star Publications saw its net profit drop 19% y-o-y to RM112 million while revenue fell marginally by 1% to RM1.01 billion.
Star Publications shares closed down 0.78% at RM2.56 yesterday, bringing a market capitalisation of RM1.89 billion.
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This article first appeared in The Edge Financial Daily, on March 12, 2015.