This article first appeared in The Edge Malaysia Weekly on April 27, 2020 - May 3, 2020

STAR Media Group Bhd is finally seeking to unlock the value of some of its assets. The media group is on the lookout for joint-venture partners to develop several parcels of land it owns.

In mid-March, it started putting up advertisements in the classified section of its newspaper, The Star, seeking interested parties to pitch ideas for the development of two properties — a 219,978 sq ft freehold industrial parcel in Bukit Jelutong, Shah Alam, and a 3.99ha freehold agricultural plot in Bentong, Pahang. The group has also been advertising the sale or rent of its 5-storey shopoffice in USJ, Subang Jaya.

Star Media’s 2018 Annual Report shows that the two parcels have a combined net book value of RM11.46 million while the shopoffice has a net book value of RM2.28 million.

It is worth noting that it has been more than a decade since the three properties were last valued.

The advertisements have been running since March 14.

Star Media’s assets have often been talked about. Many see them as the crown jewel of the group, with its land bank totalling 48 acres. Cumulatively, the net book value of the 18 properties listed in its 2018 Annual Report amounts to RM155.72 million, or about 21 sen per share.

However, the group has estimated the market value of the land bank at more than RM600 million, according to a report by CGS-CIMB Research dated July 22, 2019.

The group’s notable parcels include a 7,204 sq m industrial piece in Bayan Lepas, Penang, which is adjacent to its 19,472 sq m printing plant that was closed down in 2018.

The state government had plans to expand Bayan Lepas through a series of land reclamations, which would boost the value of land in the area, but there have not been any updates since.

In Bukit Jelutong, Star Media also has a freehold industrial parcel measuring 405,979 sq ft and a 205,117 sq ft freehold plot that houses its printing plant.

If the group’s market value estimate of its assets at more than RM600 million still stands, it would work out to be worth at least 81.94 sen per share, slightly over two times the share price of the group.

Last Wednesday, the counter closed at 36.5 sen, valuing the group at RM267.24 million.

The 81.94 sen per share figure does not take into account the group’s cash pile of RM385.93 million as at Dec 31, 2019. On a per share basis, the net cash amounts to 52.71 sen.

“If we look at the potential market value of its assets and its current share price, it seems to suggest that investors are valuing its core business at a negative value,” says CGS-CIMB Research analyst Kamarul Anwar.

Currently, the stock is trading at 0.3 times its price-to-book value, he adds, which is far below the average PB value of 0.89 times during the 2009 global financial crisis.  

Star Media’s share price has almost halved to 36.5 sen from 71 sen on April 23 last year.

For the financial year ended Dec 31, 2019 (FY2019), the group posted an 8.6% year-on-year increase in net profit to RM5.68 million, despite a 19.5% y-o-y decline in revenue to RM315.93 million.

CGS-CIMB Research said in a Feb 28 report that if it had not been for its investment income, Star Media would have plunged into the red for the year as print advertising dollars shrank significantly, far worse than expected.

The outlook for the group looks dim as it battles with structural changes in the industry and falling advertising expenditure (adex). It has moved into initiatives such as events, exhibitions and subscription video on demand to diversify its revenue but they contribute less than half of total revenue.

In an April 20 report, AllianceDBS Research forecast that the group will record a full-year loss of RM3.6 million in FY2020 due to the Covid-19 outbreak and Movement Control Order, which has led to a slowdown in adex and daily physical circulation.

CGS-CIMB Research concurs, expecting Star Media to post losses this year as its print business no longer has a large-enough profit base to cover its underperforming divisions.

“And with the Covid-19 outbreak, we are concerned that the events division will be unable to conduct many events in FY2020,” it adds.

Redevelopment or disposal of its assets could help unlock value but it may take some time due the current economic situation and soft property market.

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