Friday 29 Mar 2024
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This article first appeared in Forum, The Edge Malaysia Weekly, on March 6 - 12, 2017.

 

In conglomerates and the media — two brick-and-mortar staples of 1990s Corporate Malaysia — ­reality bit hard this week.

First, the media.

Quarterly earnings as at end-December in such staples as Star Media Group, Media Chinese International, Media Prima and Utusan Melayu (Malaysia) offered cold, hard proof of the double-digit declines in advertising expenditure last year.

The reasons for their poor fortunes are well-­documented.

Domestically, they mostly centred on poor business confidence (1MDB, corruption, weak growth outlook) and lost credibility (lopsided reporting, political ownership).

Internationally, the migration from print to online has been inexorable and savage.

Only the best global franchises (such as The New York Times and The Times of London) have made a fistful of paywall subscriptions, thanks to a reputation built from over a century of incisive reporting and analysis.

Outside of paywalls, salvation for global players has come from the internet space, where billionaires like Jack Ma (South China Morning Post) and Jeff Bezos (The Washington Post) have bought up these blue-chip names with their own dime — hopeful that someday, sometime, their own brand of news and opinion leadership may be integrated into their online properties.

In our own backyard, no such thing will happen. Paywalls will not work for obvious reasons (ahem: no credibility). And no regional scale means no ­billionaire white knights.

Intriguingly, all four media companies — as if aware, in their heart of hearts, of their own shortcomings and albatrosses — have chosen non-traditional news paths for survival.

Cityneon, Star Media Group’s events and exhibitions unit, has expanded to become the group’s second biggest revenue generator. But growth has sputtered into the single digits, while its margins are nowhere near as plump as its print side.

Digital? Don’t know, since it is conveniently lumped together with the largest component, print, so its trajectory is anyone’s guess.

Media Chinese International has also adopted a non-print growth strategy, focusing on travel and travel-related services.

But even more so than Star, revenue in this segment is tiny (less than 5%) when considered against the entire group.

And like its larger aviation and leisure peers (that also occupy the space), the terror attacks in Europe and competitive pressures from online players have militated against fortunes, so the chances of saving the group in the medium term appear slim.

Media Chinese International has said its digital business is on a “positive note” and “growing”, but like Star Media, has blushingly hidden its numbers inside the roomier print segments, so again, it is anyone’s guess just how well it is doing.

Over at the more diversified Media Prima, content is more its mainstay, with free-to-air TV, radio and outdoor advertising being real and profitable alternative revenue streams to an ailing print division.

But although the plunge has not been as drastic, growth is at best moribund, with all the three mentioned segments flat from a year earlier. Home shopping via CJ WOW SHOP is a bright spark, but all told, it was still not enough to lift the entire TV segment.

Digital (hooray!) has courageously broken out into its own segment, thanks to the success of Tonton, but at a combined RM33 million in full-year revenues, is sardine-like (2.5%) in the group revenue aquarium.

Utusan?

Well, there is not much one can say about it for obvious reasons, other than to mention in passing that it is controlled by Umno.

In an earnings context, it has not been pretty: just three profitable quarters (in operating terms) out of the last 20. Or more tellingly (as it is more recent), just one profitable quarter of the last 12.

Growth strategy? Unclear, since outside of print, there are no meaningful contributors. But Utusan did say it is “actively seeking new businesses” while also promoting its Utusan Online portal and digital newspapers. E-learning (Tutor Guru) is also said to be on a growth path.

A serious bout of existentialism is definitely afflicting the media sector then, with the privately held players also positioning their assets, people and money into new, high-growth areas.

Were it not for the considerable size and still-viable (but dying) models currently being used, Malaysia’s media groups could be investing more aggressively into new sectors — digital clearly being one of them — but old habits die hard.

Wonder what the landscape will look like in 10 years’ time.

Conglomerates: Sime Darby, specifically.

Guess it took the clout and corporate nous of Permodalan Nasional Bhd (PNB) chairman Tan Sri Abdul Wahid Omar and CEO Datuk Abdul Rahman to work up the courage to finally unravel one of Corporate ­Malaysia’s most expensive mistakes.

On the main counts of market capitalisation, revenue and profit growth and cost management, the agglomeration that became Sime Darby — from the merger of eight listed companies 10 years ago in a RM31 billion deal — only really benefited the advisers, and not the shareholders as originally hoped.

Over the most recent five-year period, revenues and net income have been on a downward trend, while cash levels (and cash flow) have been declining or in negative territory in all but one of those years (2014).

Debt, meanwhile, has ballooned, reducing only in 2016, when the new management engineered asset sales like its commercial buildings in Australia and Singapore, while refinancing debt with a fresh sukuk bond.

In a nod to the weak market conditions and

extending a clutch of fresh olive fruit bunches to its oh-so-patient investors, Sime’s decision to pursue a demerger via a simple share distribution exercise — not a public share offering or fundraising — was welcome.

At last, Sime’s long-suffering shareholders will receive direct and tangible benefits of pure property and plantation plays, a decade after they were promised a Shangri-La of “value accretion”, “significant cost and revenue synergies” and “improved operating efficiencies”.

That such benefits could have been enjoyed 10 years ago (the so-called “conglo discount” is not a new concept) via a more streamlined structure is now moot.

The future is clearly more important, and with Sime, the outlook of its pure plays are arguably better than its media counterparts that are still struggling with a clear direction.


Khoo Hsu Chuang is a contributing editor at The Edge Malaysia

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