This article first appeared in The Edge Financial Daily, on January 4, 2016.

Star Media Group Bhd
(Dec 31, RM2.34)
Maintain sell with an unchanged target price of RM1.95: We believe the challenging market environment, poor consumer sentiment and weak ringgit against the US dollar have caused advertisers to be cautious about their advertising expenditure (adex) spending. 

On top of that, we expect the outlook for the print media sector to remain challenging in 2016, given the continuous shift in adex revenue towards the broadcast segment, coupled with a decline in hard copy newspaper circulation.   

Star Media Group Bhd’s radio segment is undergoing some restructuring. Among its English radio channels, Capital FM is already in autopilot mode, as most of its DJs have exited the station, while Red FM was expected to run until end-December 2015, before going into autopilot mode as well. 

The group will decide whether to keep its four radio channels or sell them off.  

On Nov 15, Star Media was delisted from the Securities Commission Malaysia’s syariah-compliant stock list. This was mainly due to its failure to meet the cash or total asset criterion. 

As such, the group has invested approximately RM128 million in syariah-compliant products to bring down its cash or total asset below the 33% level. 

The group believes that it will be included back in the syariah-compliant stock list in 2016.   

We are cautious about Star Media due to: i) It being adversely affected by the shift in adex revenue towards the broadcast segment from print; ii) potentially cautious ad spending given the implementation of the goods and services tax, uncertainties in the market, as well as poor business and consumer sentiment; and iii) negative effects on hard copy circulation due to the continuous shift in preference for reading on mobile or the Internet. — Affin Hwang Capital, Dec 31