Star Publications (M) Berhad (Star) has undergone restructuring in the past 2 years, which we believe has re-aligned the group‟s focus to grow as an integrated media platform. We are initiating coverage on Star with our likes for its i.) growth plans especially in its non-print media business while defending its print business, ii.) undervalued at 10x PE which we believe is deserving of a higher PE valuation, and iii.) expected net cash pile of RM295m (FY14F) which could be seen to translate into higher dividends. We recommend Star with an Outperform call at TP RM3.49 on the basis of our blended DCF and SOP valuation. We are also positive on the recent appointment of Datuk Seri Wong Chun Wai as acting group CEO, a veteran in the media industry with 29 years of experience with Star to minimise any doubts of capable management succession.

Print. The largest segment contributor to Star‟s revenue (74%) and PBT (98%) for FY12. We assume would continue to perform supported by lower newsprint prices and efforts from the group to cross-sell its print and other media offerings to divulge more compelling media products.

Non-print expansion. In the past 3 years, the group has added some new businesses to its portfolio, such as Red Tomato (print – Chinese publication), Capital FM (radio), Perfect Livin

(events), Life Inspired (TV) and most recently acquired a 90% equity stake in Ocision Sdn. Bhd., which owns Propwall.com, iBilik.com and Carsifu.com. These latest additions would complete Star as a digital media solutions provider in the missing categories.

An ultimate dividend play. With strong net cash pile y-o-y, the group has traditionally been rewarding their shareholders with high dividend yields of c.6%. In light of the group‟s internal restructuring, we are expecting dividends to dip slightly but will continue to climb back to its 6% levels with better earnings estimates going forward. But with no dividend policy implemented, we have only assumed an average payout of 65% based on historical, translating to dividend yields of 5.4% (FY13F), 5.8% (FY14F) and 6.1% (FY15F) respectively.

A firm Outperform. Investors will receive i.) high dividend yields, ii.) a diversified business, and iii.) a potentially high growth stock at cheap valuations, trading 10x vs. industry of c.14x.

Source: PublicInvest Research - 13 Aug 2013