KUALA LUMPUR: RAM Rating Services Bhd has assigned respective final long- and short-term ratings of AA1 and P1 to Star Publications (Malaysia) Bhd's proposed up to RM750 million debt notes.
It said on Thursday, May 5 the AA1 rating was for the RM750 million Medium-Term Notes Programme (2011/2026) and P1 for the proposed up to RM750 million Commercial Papers Programme (2011/2018). Both facilities have a combined limit of RM750 million in nominal value.
RAM Ratings reaffirmed the AA1/P1 ratings of STAR's RM350 million Commercial Papers/Medium-Term Notes Programme (2005/2012) on 21 April 2011. Both long-term ratings have a stable outlook.
The ratings reflect STAR's dominant market position and robust financial profile. The Group's flagship daily, The Star, remains the clear leader in the local English-language newspaper market, supported by its strong circulation and readership bases.
STAR's balance sheet and cashflow-protection metrics remained strong as at end-December 2010; its gearing ratio had more than halved to 0.09 times (end-December 2009: 0.23 times), underscored by a lighter debt load. At the same time, STAR retained its net-cash position.
Led by its lower borrowings and stellar operating performance amid a more robust advertising market in 2010, the Group's funds from operations debt cover (FFODC) catapulted from 0.70 times to over 2 times.
On the other hand, STAR's future investments may pose new risks to the Group. In the near term, it may invest some RM60 million in new media assets, i.e. television (TV) channels, radio stations, online media and event organising.
The Group is expected to incur losses for some of these investments during their respective gestation periods given that they are fairly new businesses.
In addition, STAR lacks experience in the TV segment, which is viewed to be more competitive than its mainstay newspaper business.
The ratings also remain constrained by the Group's susceptibility to economic cycles, its vulnerability to newsprint price volatility and the increasing prominence of other media platforms.
While print advertising expenditure (adex) has expanded, TV and radio adex has been rising more rapidly. Circulation and readership of English-language newspapers have also been declining, consistent with the trend witnessed in more developed nations, albeit at a slower pace.
Nonetheless, we opine that print will remain relevant in the eyes of Malaysian advertisers, at least in the medium term.
'Even factoring in additional borrowings for its investments, capital expenditure for the possible development of the STAR media hub in Shah Alam and working capital, we expect the Group to continue exhibiting conservative gearing levels and sturdy debt-coverage ratios.
STAR's gearing ratio is expected to be kept at around 0.3'0.4 times while its FFODC is envisaged to slip, albeit remain favourable at a minimum of 0.5 times over the next 2 years,' notes Kevin Lim, RAM Ratings' Head of Consumer & Industrial Ratings.
It said on Thursday, May 5 the AA1 rating was for the RM750 million Medium-Term Notes Programme (2011/2026) and P1 for the proposed up to RM750 million Commercial Papers Programme (2011/2018). Both facilities have a combined limit of RM750 million in nominal value.
RAM Ratings reaffirmed the AA1/P1 ratings of STAR's RM350 million Commercial Papers/Medium-Term Notes Programme (2005/2012) on 21 April 2011. Both long-term ratings have a stable outlook.
The ratings reflect STAR's dominant market position and robust financial profile. The Group's flagship daily, The Star, remains the clear leader in the local English-language newspaper market, supported by its strong circulation and readership bases.
STAR's balance sheet and cashflow-protection metrics remained strong as at end-December 2010; its gearing ratio had more than halved to 0.09 times (end-December 2009: 0.23 times), underscored by a lighter debt load. At the same time, STAR retained its net-cash position.
Led by its lower borrowings and stellar operating performance amid a more robust advertising market in 2010, the Group's funds from operations debt cover (FFODC) catapulted from 0.70 times to over 2 times.
On the other hand, STAR's future investments may pose new risks to the Group. In the near term, it may invest some RM60 million in new media assets, i.e. television (TV) channels, radio stations, online media and event organising.
The Group is expected to incur losses for some of these investments during their respective gestation periods given that they are fairly new businesses.
In addition, STAR lacks experience in the TV segment, which is viewed to be more competitive than its mainstay newspaper business.
The ratings also remain constrained by the Group's susceptibility to economic cycles, its vulnerability to newsprint price volatility and the increasing prominence of other media platforms.
While print advertising expenditure (adex) has expanded, TV and radio adex has been rising more rapidly. Circulation and readership of English-language newspapers have also been declining, consistent with the trend witnessed in more developed nations, albeit at a slower pace.
Nonetheless, we opine that print will remain relevant in the eyes of Malaysian advertisers, at least in the medium term.
'Even factoring in additional borrowings for its investments, capital expenditure for the possible development of the STAR media hub in Shah Alam and working capital, we expect the Group to continue exhibiting conservative gearing levels and sturdy debt-coverage ratios.
STAR's gearing ratio is expected to be kept at around 0.3'0.4 times while its FFODC is envisaged to slip, albeit remain favourable at a minimum of 0.5 times over the next 2 years,' notes Kevin Lim, RAM Ratings' Head of Consumer & Industrial Ratings.
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