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Malaysia

PP 7767/09/2010(025354)

Corporate Highlights
New s Upda te

RHB Research Institute Sdn Bhd A member of the RHB Banking Group
Company No: 233327 -M

MARKET DATELINE

4 March 2010 Share Price Fair Value Recom : : : RM3.44 RM3.60 Market Perform (Maintained)
Bloomberg: STAR MK EPS Growth# (%) -14.5 15.4 14.0 4.7 PER# (x) 17.6 15.2 13.4 12.8 C.EPS* (sen) 22.0 24.0 28.0 # excludes EI

Star Publications
Entering JV With Jaks Island To Develop PJ Land

Table 1 : Investment Statistics (STAR; Code: 6084) Net FYE Dec 2009 2010f 2011f 2012f Turnover (RMm) 974.4 1006.1 1048.0 1083.0 profit (RMm) 144.6 166.9 190.2 199.1 EPS (sen) 19.6 22.6 25.8 27.0 Core EPS# (sen) 19.6 22.6 25.8 27.0

Net P/NTA (x)
2.1 2.0 2.0 1.9

Gearing (x)
cash cash cash cash

ROE (%)
11.7 13.1 14.4 14.4

GDY (%)
6.7 6.1 6.5 7.2

Main Market Listing / Non-Trustee Stock / Syariah-Approved Stock By The SC

* Consensus Based On IBES Estimates Issued Capital (m shares) Market Cap (RMm) Daily Trading Vol (m shs) 52wk Price Range (RM) Major Shareholders: Huaren Holdings EPF Amanah Saham B’putera FYE Dec EPS chg (%) Var to Cons (%) PE Band Chart
PER = 20x PER = 17x PER = 14x

Entered into a JV with Jaks Island to develop PJ Land… Star has entered into a joint development agreement with Jaks Island Circle Sdn Bhd (“Jaks Island”). Jaks Island is a 51%-owned subsidiary of Jaks Resources Berhad, has previous experience in developing USJ Sentral that is located in USJ’s township. The proposed agreement is to develop mixed residential and commercial development, which comprise three office towers and a 15-storey residential block. The total GDV is approximately RM370m, which should be completed within 2-3 years. Star will contribute a piece of 24,568 sq. mt. leasehold commercial land in Petaling Jaya to the project. The land is currently occupied with a few blocks of factory and office buildings that has been rented out to Utar Education Foundation at a monthly rental of RM115.8k. … with plans to launch a mixed residential and commercial development. Under the agreement, Star is entitled to saleable office units with a build up of 220,000 sq. ft., which Star plans to house its three radio stations and its new multi-media division that is currently housed in a rented premise. All the cost and expenses are to borne entirely by Jaks Island, which is estimated to be approximately RM280m. No significant impact to earnings. Assuming that Star rents out the whole of the 220,000 sq. ft. at RM2.00 per sq. ft. (based on the rental rate that Jaks Island is proposing to lease one of the office towers to University Tunku Abdul Rahman) or RM5.3m p.a., Star could recognised approximately RM3.9m in incremental annual rental income (after taking into account rental income of RM1.4m foregone from Utar Education Foundation). This RM3.9m is approximately 0.4% of FY12 revenue, is insignificant. Risks. The risks include: 1) stronger-than-expected adex; 2) lower-thanexpected newsprint costs; and 3) an appreciating RM vs. the US$. Forecasts. We have maintained our FY10-12 earnings forecast unchanged for now. Investment case. Our indicative fair value is maintained at RM3.60 based on unchanged target FY10 PER of 16x. We reiterate our Market Perform call on the stock.
Please read important disclosures at the end of this report.

738.6 2,540.7 0.2 3.00-3.44 (%) 41.3 14.6 7.2 FY11 7.3 FY12 (3.7)

FY10 2.7

Relative Performance To FBM KLCI

FBM KLCI

Star Publications

♦ ♦ ♦

David Chong, CFA (603) 9280 2179 david.chong@rhb.com.my

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4 March 2010

Table 3 : Earnings Forecasts FYE Dec (RMm) FY09a Turnover 974.4 Turnover growth (%) 34.7

FY10F 1,006.1 3.3

FY11F 1,048.0 4.2 314.7 30.0 (46.1) 268.6 25.6 13.1 (2.6) 0.0 279.1 (72.6) (16.3) 190.2 190.2

FY12F 1,083.0 3.3 329.0 30.4 (47.0) 282.1 26.0 13.1 (2.6) 0.0 292.6 (76.2) (17.3) 199.1 199.1

EBITDA 265.8 287.9 28.6 EBITDA margin (%) 27.3 (45.2) Depreciation (48.3) EBIT 217.5 242.6 24.1 EBIT margin (%) 22.3 6.5 Net Interest (15.7) Associates (4.7) (2.6) 0.0 Exceptional items 0.0 246.5 Pretax Profit 197.1 (64.3) Tax (47.7) Minorities (4.8) (15.3) 166.9 Net Profit 144.6 166.9 Core Net Profit 144.6 Source: Company data, RHBRI estimates

Table 4 : Forecast Assumptions FYE Dec FY10F Ad rate growth (%) 0.0 Ad revenue growth (%) 6.5 Circulation growth (%) 0.0 Avg newsprint cost (US$/mt) 650

FY11F 0.0 4.5 0.0 650

FY12F 0.0 3.3 0.0 650

IMPORTANT DISCLOSURES
This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank (previously known as RHB Sakura Merchant Bankers). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may from time to time have an interest in the securities mentioned by this report. This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts any liability for any loss or damage arising out of the use of all or any part of this report. RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity securities or loans of any company that may be involved in this transaction. “Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors, officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports. This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel. The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues. The recommendation framework for stocks and sectors are as follows : Stock Ratings Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months. Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on higher risks. Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months. Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months. Industry/Sector Ratings Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months. Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months. Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months. RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended securities, subject to the duties of confidentiality, will be made available upon request. This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the actions of third parties in this respect.

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