Friday 29 Mar 2024
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Star Media Group Bhd 

DESPITE earnings contraction over the last two years and an unexciting outlook for the print media, Star Media Group (Fundamental: 2.5/3, Valuation: 1.4/3) takes comfort from its dominant position and its ability to reward investors with high dividend yields. 

Based on total dividend of 18 sen per share in 2014, the stock offers an attractive yield of 7.2% – one of the highest on the local bourse.

Excluding exceptionally large payout in 2005 and 2010 of 32 sen and 58 sen, respectively, Star has been paying fairly consistent dividends of between 15 sen and 18 sen per year. Excluding those two years, the dividend payout ratio ranged from 71% to 119%. 

While the payout ratio rose from 77% to 119% in 2014, we believe its large dividends are sustainable over the near term as it has a net cash position of RM367 million (equivalent to 50 sen per share) and generates an average free cash flow of RM176 million (24 sen per share) for 2010-2014. 

Star is the most widely read English language newspaper in the country. Although it has diversified into radio, television and event management, the print and digital segment remains its main revenue generator, contributing 70% of revenue and 106% of pre-tax profit in 2014. 

For 1Q15, revenue rose 3% y-y to RM217.4 million while net profit jumped 63% to RM26.5 million, primarily due to cost rationalisation expenses incurred in 1Q14. 

The print and digital revenue for 1Q15, however, contracted by 0.3%, mainly due to lower print circulation and digital revenue. Looking ahead, the industry’s outlook is challenging as overall advertising expenditure has been affected by poor consumer sentiment.

The Malaysian Chinese Association (MCA) owns a 42% stake in the company and institutional investors collectively hold some 41% of its shares. The stock currently trades at a trailing 12-month P/E of 15.2 times, compared with Media Prima’s 25.0 times and Media Chinese’s 8.8 times. 

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This article first appeared in The Edge Financial Daily, on June 29, 2015.

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