‘Uncertainties to affect Star share price’

KUALA LUMPUR: Star Media Group Bhd’s share price in the near term could be dampened due to uncertainties surrounding the future of the Malaysian Chinese Association (MCA).

MCA, which holds a 43 per cent stake in the media company, is undecided whether to continue as a component party in Barisan Nasional with most of its service centres shutting down due to lack of funds.

AllianceDBS Research said with the changing landscape for the media industry in Malaysia and abolishment of the Printing Presses and Publication Act 1984 it will encourage potential new entrants into the sector, which could threaten Star’s dominant position.

“Star’s print advertising expenditure (adex) revenue has been on a downtrend since 2012. The accelerating pace of decline suggested that it was becoming more of a structural issue rather than cyclical,” said AllianceDBS in a report.

“Anecdotal evidence would point to a structural shift towards online and digital media which was getting more attention from advertisers.”

Star posted a net profit of RM11.3 million for the first quarter (1Q) 2018 which came within AllianceDBS’ expectations, accounting for 27 and 25 per cent, of the research firm’s and consensus full-year forecasts, respectively.

In addition to adex revenue, sales from the print segment remained weak in 1Q18, having fallen by 11 per cent year-on-year.

Nevertheless, AllianceDBS said this segment was able to record a higher profit (more than double) mainly due to lower salary costs and depreciation expenses.

Star made a few major impairments in the fourth quarter of last year, which included a RM34 million goodwill impairment, a RM87 million property, plant and equipment impairment and write-off, and a RM56 million mutual separation scheme expenses.

AllianceDBS has revised its profit take on Star to RM0.94, based on 0.8 times book value and is maintaining a “hold” call for the stock.