Friday 29 Mar 2024
By
main news image

This article first appeared in The Edge Malaysia Weekly on September 24, 2018 - September 30, 2018

ALTHOUGH Star Media Group Bhd is currently not in its best financial state, the fact that it is still turning a profit sets it a cut above other struggling Bursa Malaysia-listed media companies. Many print-based media firms, not only those in Malaysia, are trying hard to stay afloat.

“We still haven’t seen the bottom for print,” TA Securities analyst Wilson Loo tells The Edge, adding that there are no catalysts in sight for the segment, which is beleaguered by rising newsprint cost and declining circulation.

Despite aggressive cost-cutting measures by firms such as Star and Media Prima Bhd, this is not enough to offset the decline in revenue, he adds. On top of that, the digital push may be “fast-moving, but starting from a very small base”, he shares.

Two public-listed media groups, namely Berjaya Media Bhd and Utusan Melayu (M) Bhd, have fallen into Practice Note 17 (PN17) status.

Berjaya Media, which publishes theSun newspaper, risks being delisted if it fails to meet a Dec 20 deadline to submit its regularisation plan to the authorities for approval. The group slipped into PN17 status in June last year after its shareholders’ equity on a consolidated basis fell to less than RM40 million.

Meanwhile, Utusan is not short of problems. Last Friday, it was learnt that the group had offered a voluntary separation scheme to more than half its 1,500 workers. This came days after the company’s journalists and photographers were reported to be ready to picket over unpaid salaries — urged by the National Union of Journalists — after being told the company no longer had sufficient funds to pay its staff.

The group’s operating cash flow, however, has been seen to be improving, turning positive in its financial year ended Dec 31, 2017 (FY2017), to RM4.08 million after two years in the red and rising further to RM19.68 million in the first half of this year.

However, the group, which is 49.77%-owned by Umno, is facing a suit filed by Ancom-linked companies Nylex (M) Bhd and Redberry Sdn Bhd, which owns the Malay Mail newspaper. The two companies are demanding the return of cash advances amounting to RM18.5 million.

Former Utusan chief editor Tan Sri Zainuddin Maidin and former minister Tan Sri Rais Yatim have pointed at the political patronage as a reason for the group’s weakness, particularly its over-reliance on government advertisements.

Utusan fell into PN17 status on Aug 20 after it defaulted on RM1.18 million in payments due to Maybank Islamic Bhd and Bank Muamalat Malaysia Bhd. It has about 11 months to submit a regularisation plan, failing which it may be suspended from Bursa. The group has enlisted the help of the Corporate Debt Restructuring Committee, a unit of Bank Negara Malaysia, to mediate between itself and its financiers.

Utusan has been wallowing in the red in the past six financial years, although its net loss narrowed 89.1% to RM7.46 million in FY2017 compared with a year earlier. Its net loss thinned further to RM2.65 million in its second quarter ended June 30, 2018 (2QFY18), from RM10.68 million a year earlier, and quarterly revenue climbed 19% year on year to RM63.87 million.

Media Prima has had slightly better luck. Its print segment, housed under The New Straits Times Press (M) Bhd (NSTP), recently made a turnaround in its second quarter ended June 30 (2QFY2018), after four consecutive quarters of losses. The group made a net profit of RM31.95 million in 2QFY2018 — versus a net loss of RM132.9 million in the previous year — on the back of higher revenue and a gain on disposal of an associate.

However, on a full-year basis, NSTP’s revenue has been on a downward trend since its financial year ended Dec 31, 2013.

Among measures it has taken to shore up its bottom line is the sale of a land parcel and three properties in Bangsar and Shah Alam to PNB Development Sdn Bhd for RM280 million — an 8.35% discount to market value.

The group has also been making great strides in the digital space, acquiring digital media group Rev Asia Holdings Sdn Bhd for RM105 million last year and partnering YouTube recently to consolidate its online video content.

Although Media Prima is not directly owned by a political party — its largest shareholder is Morgan Stanley with a 12.73% stake, followed by the Employees Provident Fund and Amanah Raya Bhd with 11.85% and 11.09% respectively — The Edge understands that the group could see the emergence of new shareholders soon.

“There’s definitely value in the company,” says TA Securities’ Loo, when asked about the attractiveness of the group as a takeover target. “It has intangible value in terms of its audience reach [from] its print, TV, digital and out-of-home platforms, compared with other media [firms].”

Given the harsh operating environment and competition from the free content over the internet, media stocks are off most investors’ radar now, except for those who are looking at the value of assets the companies have, such as prime land bank.

It is not difficult to fathom why share prices of Media Prima and its peers have been uninspiring. Media Prima’s share price has declined 35.62% year to date to 47 sen while that of Star has fallen 40.14% to 84 sen. Berjaya Media has dropped 43.75% since the start of the year to 19 sen while Utusan has declined 56.41% to a record low of 14 sen.

Even Media Chinese International Ltd, which saw a brief spike in March due to an arbitrage opportunity upon the listing of a Hong Kong-based associate, has fallen 16.33% year to date to 27 sen. The group controls Chinese-language newspapers Sin Chew Daily, China Press, Nanyang Siang Pau and Guang Ming Daily.

The Chinese paper’s Malaysian operations have not been spared, with advertising expenditure declining 12% to RM589.96 million in its financial year ended March 31, 2018, from RM669.39 million previously.

“Despite the improvement in the general economy of the countries we operate in, our businesses have not benefited as the sectors in which our advertisers operate in remained subdued,” the group says in its latest annual report.

Amid what looks like the irreversible decline of print-based media, media companies will most probably be sharing the same weak outlook in the near future. For industry observers, this begs the question of whether the current scenario will set a consolidation wave in the industry — a trend that has been happening elsewhere in the world.

 

 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.

      Print
      Text Size
      Share