Friday 29 Mar 2024
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KUALA LUMPUR (Nov 21): Despite posting its highest-ever quarterly earnings in the third quarter ended Sept 30, 2017 (3QFY17) thanks to a divestment gain of RM206.86 million, analysts are still wary of the outcome of Star Media Group Bhd’s continued decline in print advertising expenditure (adex).

AmBank Research said according to the Malaysian Institute of Economic Research (MIER), the Consumer Sentiments Index (CSI) declined from 80.7 in 2Q17 to 77.1 in 3Q17, due to deteriorating household income and concerns over rising inflation. 

Using the CSI as a gauge for consumer spending, the research firm believes Star Media could continue seeing declines in both adex rates and volume, particularly in print, and may only have a more positive sentiment on the adex outlook, should the CSI surpass the 100-mark. 

“Moving forward, prospects of the group appear unexciting due to the continuous decline in newspaper circulation, amid increasing availability of digital content, a subdued adex outlook against the backdrop of weak consumer sentiment and lack of growth component, after the disposal of Cityneon,” AmBank Research, which upgraded its rating on the media group from ‘hold’ to ‘buy’, and said the selldown of Star shares is overdone in spite of duller prospects without Singapore-listed Cityneon Holdings Ltd.

Similarly, TA Research said the drop in print adex remains a key concern, noting that the industry’s newspaper adex was down 21.7% year-on-year as at September this year, due to a shift towards digital platforms.
 
“While economic numbers have been positive, the effects have not filtered through to consumers. The consumer sentiment index has retreated to 77.1 in 3Q17,” TA Research said in its note today.
 
“Priorities will be placed on its digital transformation strategy, to reduce dependence on adex. dimsum.my, its video on demand service, has reported encouraging data. However, the venture will likely be loss making for the foreseeable future,” the research firm said, adding it is maintaining its ‘Sell’ recommendation on the group.
 
In 3QFY17, Star Media posted a net profit of RM230.29 million against RM11.31 million a year earlier. Excluding the divestment gain, the group recorded a pre-tax profit (PBT) of RM13.6 million for 3QFY17, as its accumulated PBT surged to RM227.47 million for the nine months ended Sept 30 (9MFY17), from RM6.99 million a year ago.
 
However, quarterly revenue dipped 14.8% to RM130.88 million, from RM153.62 million a year ago (3QFY16).
 
For the first nine months of the financial year, the group’s net profit jumped to RM245.44 million, from RM70.47 million in 9MFY16, while cumulative revenue came in at RM391.39 million in 9MFY17, 18% lower than the RM477.06 million the previous corresponding period, mainly due to lower revenue contribution from its print segment.
 
At 12.18pm, Star Media rose to 1.46% or two sen to RM1.39, with some 1.38 million shares traded.
 
The group’s share price hit its lowest in over eight years at RM1.35 on Nov 17, 2017, since closing at RM1.39 on June 30, 2009.
 
On a more positive note, MIDF Research is revising its FY17 and FY18 earnings estimates upwards to RM37.4 million and RM42.1 million respectively, on better profit margin assumption for the broadcasting and television business segments, as well as on lower depreciation and amortisation charges.
 
“Cash reserve remains sizeable. Star’s cash reserve surged by 41.1% as at 3QFY17 to RM705 million, as compared to RM500 million recorded as at 4QFY16. This was mainly due to cash received from the disposal of Cityneon,” MIDF Research said.
 
“Subsequent to the payment of first interim and special dividend which amounted to 36 sen per share or RM265.7 million, we view that Star’s cash reserve would remain sizeable at RM439.4 million or 59.5 sen per share. This would enable Star to maintain its commitment to deliver attractive dividend yield,” the research house, which upgraded its call on the group to ‘Buy’ from ‘Sell’, added.

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