Star Publications (M) Bhd
(March 4, RM2.60)
Maintain hold calls with an unchanged target price of RM2.35. The management indicated that overall advertising expenditure (adex) for the industry is likely to remain subdued in 2015 as consumers withhold spending due to the goods and services tax implementation, a view in line with ours. Nevertheless, the management expects adex for its print and radio divisions to be relatively more stable than TV as advertisers tend to migrate ad spend to cheaper mediums during tough times.

The full-year impact from the closure of Star Publications’ Sarawak operation and disposal of its loss-making magazine business such as Red Tomato and Shang Hai should help to keep costs and margins stable in 2015. Additionally, global newsprint prices have continued to trend down due to ample supply, though this will be partly offset by the weaker ringgit. 

In view of the low newsprint prices, Star Publications intends to reduce its newsprint inventory level from approximately 10 months to six months.In the near term, Star Publications is planning to expand its business into transit advertising such as advertising placed in or on public transport or public transportation areas. 

We think this is a good idea as public transport ridership is likely to improve tremendously once the various mega projects such as the mass rapid transit and light rail transit are completed. Besides that, Star Publications is also considering to set up a TV channel once digital TV migration starts.  — AllianceDBS Research, March 4

This article first appeared in The Edge Financial Daily, on March 5, 2015.