Star Publications (Malaysia) Berhad ('Star') is principally engaged in the publication, printing and distribution of newspapers and magazines. It is the publisher of the Star newspaper, the largest English language newspaper in Malaysia.
Next Growth Engine
In late 2008, Star took over the Singapore-listed, Cityneon Holdings Ltd when it offered S$0.58 (RM1.39) cash per share in Cityneon. The total cost of the acquisition was about S$34mil (go here). After the takeover, Star undertook a private placement of shares in order to comply with the minimum public shareholding spread of 10% of its shares in the hands of the public. After the placement, Star's stake in Cityneon was reduced to 59%
Cityneon’s core activities include exhibition and event management services while its other areas of expertise include interior architecture, galleries and thematics. Cityneon serves its international client portfolio through various subsidiaries in Asia and the Middle East, delivering events and exhibitions across the Americas, Europe, Asia and the Middle East. Cityneon was relisted in September 2009 on SGX. It has more than double its order book to S$110mil from S$52mil in January (go here).
Recent Financial Results
Star has just announced its results for QE31/12/2009, where its net profit increased by 87% q-o-q or 357% y-o-y to RM60.9 million while turnover increased by 29% q-o-q or 49% y-o-y to RM315 million. The increased top-line & Bottom-line came from Cityneon, which contributed RM11.7 million of Star's overall pre-tax of RM97 million and RM222 million of Star's total turnover of RM974 million for FYE31/12/2009.
Table 1: Star's 8 quarterly results
From Chart 1, we can see that Star's top-line & bottom-line had jumped up strongly in the past 3-4 quarters.
Chart 1: Star's 13 quarterly results
Valuation
Star (closed at RM3.20 yesterday) is now trading at a PER of 10 times (based on annualized EPS of 33 sen). Star pays a dividend of 21 sen for the past 3 years, which translates to a dividend yield of 6.6%. For a stable consumer stock, I believe Star should trade at a PER of 13-15 times. Assuming a PER of 13 times, Star's fair value is about RM4.30.
Technical Outlook
Star's chart can be summarized in one word: Semi-comatose! It is range-bound at RM2.80-3.70 (or, RM3.00-3.50). This may be about to change...
Chart 2: Star's monthly chart as at Feb 10, 2010 (Source: Tradesignum)
Conclusion
Based on attractive valuation & improved financial performance, Star should be a good stock for long-term investment.
4 comments:
Hi Alex,
I wish you, your loved ones and your loyal blog readers a Blessed and Prosperous Lunar New Year.
Kong Hei Fatt Choy!!
Cheers,
James
Hi James,
Thanks for your well wishes.
Kong Hee Fatt Choy to you too.
Hi Alex,
Happy New Year to You. Need some comment from you about Frontkn. It dropped to lowest 0.14 yesterday after the Right Issue. Worth to buy now ?
Hi David,
Fronken made a high of RM0.62 in end 2006. Since then, it has been in a downtrend line. It has recently broken below its strong horizontal support of RM0.15 (after the ex-date of the Rights Issue). From the technical picture, one would avoid this stock.
Strangely, Frontken's financial performance is quite decent. For 9-month ended 30/9/2009, it recorded a net profit of RM7.7 million on a turnover of RM103 million. This is however a sharp decline from the results for 9-month ended 30/9/2008, where its net profit was RM16.4 million on a turnover of RM98.9 million.
Financial position is deemed satisfactory with current ratio at 1.22 times while gearing ratio (comprising of bank borrowings & HP commitments to shareholders' funds) at 0.57 times. One concern is the high receivables collection period of 153 days. Frontken is involved in the provision of surface metamorphosis technology using thermal spray coating processes. Could the nature of its business contribute to the high collection period?
One should avoid Frontken based on the poor technical outlook. However, the current price action may be exaggerated by the trading of Frontken-OR & the arbitraging activity between the share & the Rights. The same can be said about MAS & MAS-OR price action during this period. It will be noted that both Frontken-OR & MAS-OR will cease trading on Feb 23. I believe a recovery in both Frontken & MAS may begin after Feb 23. The first sign of that recovery is the price surpassing the immediate horizontal resistance (which was the earlier horizontal support) of RM0.15 (for Frontken) & RM1.90 (for MAS).
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