RAM Ratings has reaffirmed the ratings of Star Publications (Malaysia) Berhad’s (STAR or the Group) RM750 million CP Programme (2011/2018) and RM750 million MTN Programme (2011/2026) at P1 and AA1/Stable, respectively.

                                                                              

Published on 16 July 2014

RAM Ratings has reaffirmed the ratings of Star Publications (Malaysia) Berhad’s (STAR or the Group) RM750 million CP Programme (2011/2018) and RM750 million MTN Programme (2011/2026) at P1 and AA1/Stable, respectively. Both facilities have a combined limit of RM750 million.
The ratings reflect STAR’s dominant market position and robust financial profile. The Group’s flagship daily, The Star, remains the most read and circulated English-language daily in Malaysia with about 65% share of advertising expenditure (adex) amongst its peers in 2013. STAR exhibits a conservative balance sheet. The Group’s average cash balance of RM500 million relative to an average debt level of around RM250 million in the past 5 financial years has enabled it to consistently boast a net-cash position. The Group also possesses a robust operating cashflow-generating ability, averaging around RM200 million annually translating into adjusted operating cashflow (OCF) debt cover of around 0.90 times over the past 5 years; albeit trending downwards.
“Despite STAR’s leadership position, the prevalence of other media platforms is a significant threat to the Group. The rising prominence of TV and radio, alongside the popularity of digital media, pose a challenge to print media,” notes Kevin Lim, RAM’s Head of Consumer & Industrial Ratings. “The Group’s ratings are further pressured by its battle to regain its reputation as a neutral media organisation owing to concerns over editorial independence,” he adds. An increased number of subscription-based online news sites and existing niche newspapers that focus on investigative journalism add to the options available to readers. Moreover, STAR is susceptible to economic cyclicality and some of its new media assets are loss-making.
Over the past 3 years, STAR’s performance has been on a gradual downtrend. Its topline has been rather stagnant at around RM1.0 billion whilst operating profit has been gradually declining, except in FY Dec 2013. This has mainly been aligned to the downtrend in the print division in tandem with the English-language newspapers. For fiscal 2013, the Group’s top line eased 5.1% to RM1.02 billion as the print division had suffered subsequent to the 13th General Elections in 1H FY 2013. That said, STAR’s operating profit improved 10.2% to RM227.87 million on the back of leaner costs in relation to the print division and the turnaround of the events division. Excluding an exceptional RM89.90 million gain from the sale of land in FY Dec 2012, STAR’s pre-tax profit rose 7.6% to RM192.59 million. STAR’s 1Q FY 2014 performance was affected by the MH 370 incident, however we expect this to normalise in the coming quarters. That said, further pressure on the print division may strain STAR’s rating. 
“Looking ahead, STAR’s financial profile is expected to remain robust. Even if it takes on additional RM100 million debt for acquisitions this year, the Group is envisaged to remain net-cash. Its adjusted gearing ratio and adjusted OCF debt cover are expected to stay favourable averaging around 0.3 times and 0.50 times, respectively over the next few years,” Lim adds.

Media contact
Sahil R Kamani
(603) 7628 1084
sahil@ram.com.my