• Maintain HOLD (TP: RM0.43). Star’s FY23 top-line was flattish amounted to RM220mn which in-line with our expectation accounting for 96.0%. Nevertheless, the group’s core net profit of RM2.9mn (-58.4% YoY) was within ours but above consensus expectations, accounting for 105% and 109% respectively. Star’s 4QFY23, revenue declined by -6.6% YoY dragged by lower contribution from print, digital & events as well as radio broadcasting segment. However, the group’s net profit grew by >100% YoY attributing from the RM6.5mn gain on the disposal of investment property recognised in the current quarter. Moving forward, we maintain caution regarding the rise in the value of the USD, as it impacts the pricing of newsprint. Maintain HOLD with an unchanged TP of RM0.43. Our valuation is based on 0.57x PBR (5-year average historical forward PBR) pegged to 2024 BVPS of 0.75 sen.

• Key highlights. Segment-wise, only the property development & investment segment recorded an improvement in FY23, increasing by over 100%. This was primarily due to the recognition of revenue from the sale of Star Business Hub units and an increase in the occupancy rates of the Group’s properties. Conversely, the radio broadcasting segment experienced a 19% drop in revenue to RM27.2mn in FY23, mainly attributed to reduced market spend within the radio industry.

• Earnings Revision. No change to our forecast.

• Outlook. Given that the print segment contributes approximately 80% of the group's revenue, there is a possibility of some margin erosion in the medium term. Due to the weakening MYR and macroeconomic challenges, we anticipate that Star's earnings growth will remain relatively flat in FY24- FY25, primarily due to subdued adex growth for its newspaper segment. However, we anticipate a slight improvement in revenue in 1H24 due to higher adex during seasonal festivities.

Source: BIMB Securities Research - 21 Feb 2024