‘Uncer­tain­ties to af­fect Star share price’

New Straits Times - - BUSINESS / NEWS -

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.

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