27 December 2012

Star Publications (Star, 6084): Investing Insight

The market price of STAR PUBLICATIONS (Star, 6084) depreciated approximately 20% to RM2.60 within two months. Is it a good chance to invest Star (6084)? Personally, I still cannot find a strong reason to invest STAR PUBLICATIONS (Star, 6084). There are three aspects I used to evaluate the value of STAR as follows:

1. Business prospect
The business prospect of local newspapers is ambiguous in both short and long terms. On one hand, I can easily obtain lots of free-of-charge conventional (hard copy) reading materials such as TheSun and ThePearl (from Jusco). On the other hand, latest news updates can always accessible via Internet. From Internet, you can access the content from local or even international publishers (such as, BBC and The Wall Street). So, do you have any specific reason to read a local hard-copy newspaper while you can easily access latest online content via Internet? One thing I am quite sure is I am less frequent to read hard-copy newspaper now.

2. Current Valuation
Let's assume TheStar managed to maintain its earning of EPS = 25sen (in fiscal year 2010). With market price of RM2.60, PE = 10. It sounds slightly attractive. But if we only consider the last four consecutive quarters, the total EPS is only around 22sen or PE = 12. Next, if Star can maintain 18sen dividend, dividend yield will be around 7%. It is also no bad, if and only if, assumptions will be fulfilled.

3. Future Trend
Nobody knows future trend. But we still can estimate (with 95% confident interval, for example) what will be disqualified in the next few years. Obviously, due to globalisation, Internet will provide almost everything it can. In other words, those can be supplied via Internal will be done via Internal. To be survive from this kind of international invasion, local players must outstanding in terms of the quality of contents that requires outstanding and experienced authors and editors. Besides that, locally, the free-copy invasion is another challenging.

Final thought
If I only consider current valuation, I may acquire some Star's shares for dividend. However, future and business prospects suggest that bigger challenges (both known and unknown) are waiting for local publishers. How them defend their market shares in the future? It is the most interesting thing I am going to observe in the nearest future. Lastly, while the companies in my portfolio have better valuation and business prospects than TheStar, I do not think I need to take any unnecessary risk to 'enrich' my life at this moment. That's all for today. More fascinating articles and sharing will be updated from time to time in Xaivier Blog. So, you are welcome to subscribe our feed, look at our sitemap or simply visit our Homepage for latest sharing.

Written by: Xaivier Chia

(P/S: The above sharing is solely based on personal insight. Please do not take it seriously. However, your valuable feedback are very welcome.)


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