PETALING JAYA: Given that Star Publications (M) Bhd achieved a surprisingly stout earnings growth last year despite the Malaysian economy contracting by 1.7%, the company has good reason to look forward to 2010.

"When we do come up with something new, we are committed to bringing lasting value to all our stakeholders" DATUK CLEMENT HII

This year, the country’s gross domestic product (GDP) is expected to expand by at least 5%. This means advertising expenditure (adex) should have little difficulty recording the increase of between 7% and 10% as projected by various industry watchers. In turn, this sets the stage for a promising year for the media players.

For Star Publications, the anticipation of a better performance in 2010 is bolstered by several other factors, such as the introduction of new products and the expectation of continuing improvements in major businesses.

Said executive deputy chairman Datuk Clement Hii: “Last year was definitely challenging for the media industry, particularly in the first half, when the weak consumer sentiment had a significant impact on advertising revenue.

“What helped a lot was that we responded quickly and decisively with cost-saving measures and a more prudent purchasing policy. It’s about being more careful in spending our money.”

This enabled the company to surpass analysts’ forecasts by notching up a 4.1% jump in its net profit for the year ended Dec 31, 2009 (FY09). Profit attributable to shareholders rose to RM144.6mil from FY08’s RM138.9mil.

In a report issued last month after Star Publications had released its fourth-quarter numbers, Kim Eng Research noted that the results for the media company’s bread-and-butter business exceeded expectations due to tighter cost management.

ECM Libra Investment Research, in a Feb 12 note, said Star Publications’ FY09 pre-tax profit for its print and electronic media business of RM192.9mil was 25% above the research outfit’s forecast, although the revenue was within expectation.

“We believe that the outperformance was possibly due to lower staff cost and/or newsprint consumption as The Star may have scaled down on non-revenue content,” added ECM Libra.

Kim Eng identified newsprint prices as a growth catalyst for Star Publications this year. The research house projected the average newsprint cost to be 12% to 15% lower than that of last year.

Said Maybank Investment Bank Research in a report last month: “Star Publications was still consuming newsprint at US$700-US$750 per tonne in the fourth quarter of FY09. Now at the tail-end of this contract, it will be able to consume newsprint at lower prices in FY10.”

According to Maybank, newsprint prices have crept up to US$534 per tonne in Feb 10 from a low of US$445 per tonne last November.

Nevertheless, there is much room for cost savings. “We are buying at the right time. Last year, we were using newsprint we had bought earlier at expensive prices. Our average cost is set to be a lot lower this year,” said Hii.

Now that the economy is recovering, Star Publications can again rely on turnover growth, via higher adex, as an avenue to boost its bottomline.

For example, the rising business and consumer confidence will likely result in higher spending in areas that have traditionally been sturdy contributors to the newspaper’s advertising revenue. These include recruitment ads and classified ads such as those for properties and vehicles for sale.

In addition, Star Publications last week launched Mingguan mStar, a Bahasa Malaysia weekly pullout with The Star, and the newspaper will launch its Sarawak edition tomorrow.

“These are exciting developments for us. We do not believe in launching products for the sake of creating a buzz. When we do come up with something new, we are committed to bringing lasting value to all our stakeholders,” said Hii.

New media has become an important arena for Star Publications as reflected in a reorganisation exercise last year, beginning with the incorporation of wholly-owned subsidiary Star MediaWorks Sdn Bhd in September.

Two months later, three other wholly-owned subsidiaries – StarProperty Sdn Bhd, JustJobs Sdn Bhd and I.Star Sdn Bhd – were transferred to Star MediaWorks. The rationale is to streamline the operations of these companies so as to enhance efficiency.