Star Media cut to ‘sell’ with lower target price
PETALING JAYA: Hong Leong Investment Bank (HLIB) Research has cut Star Media Group Bhd to a “sell” recommendation, with a lower target price of RM1.47 from RM1.98 previously, based on targeted price-to-book ratio of 1.1 times FY18 book value per share.
Due to earnings uncertainties, HLIB Research analyst Rachael Hong Hui Chee said in a note yesterday, the research house changed its valuation methodology to price-to-book value (P/BV) from price-to-earnings (P/E).
She said the group’s outlook remains subdued with challenges coming mainly from the digital disruption amid a cautious advertising expenditure outlook.
“With the void left by Cityneon, we do not expect a swift recovery to its past profitability despite ongoing trimming of expenditure,” Hong said, noting that the group’s potential acquisition to fill the void left by Cityneon will be very crucial to return to the previous level of profitability.
The group is currently sitting on balance proceeds from the disposal of Cityneon of RM138.6 million, after paying out RM221.6 million as special dividend.
Hong opined that the special dividend of 30 sen per share that went ex yesterday had acted as a short-term support to Star Media’s share price despite the poor showing in its first-half 2017 results.
The management has expressed its intention to trim operating expenditure to preserve the profitability of the print media business.
However, Hong sees this to be challenging in the absence of a concrete target for the trimming amid unfavourable sector outlook.
While Star Media has shifted its focus back to the Over-The-Top (OTT) venture – dimsum, Hong is of view it will be challenging for the group to outperform the market in this segment considering the OTT platform is overcrowded with too many players while piracy remains a major unsolved issue.
Dimsum is broadening the strength of its Asian contents, Thai contents. For exclusivity, it is partnering regional media players to create in-house contents.
Meanwhile, Hong said, print revenue, which accounts for about 60% of total group revenue, is not expected to recover in the near term.
In an effort to stimulate the sunset business, Star Media will be entering into a partnership with Singapore Business Times and The Wall Street Journal where subscribers of either platform will be able to enjoy a discounted subscription rate of the other.
The group will be taking their Power Talks to another level with more line-ups of business events and speakers exclusively for its business content subscribers.