Star Media Group Bhd
(July 22, 62.5 sen)
Maintain add with an unchanged target price (TP) of 95 sen: During our recent meeting with Star Media Group Bhd, the group elaborated on its plans to introduce an e-commerce feature to its dimsum subscription video-on-demand (SVOD) service.
Unlike Astro Malaysia Holdings Bhd — with an “add” call and TP of RM1.75 — and Media Prima Bhd’s (“hold”; TP: 48 sen) home shopping businesses, Star Media will not be involved in the logistics and fulfilment of orders, or in the production of programmes. dimsum will merely provide a platform for merchants, minimising Star Media’s outlay for this new venture.
A test run for dimsum’s e-commerce feature will begin some time in the third quarter of 2019 (3Q19), and will start with selling fashion and beauty products, catering to its women-centric audience base. The group also said the two product categories can give it a higher revenue-sharing ratio than those of other categories. Eventually, dimsum plans to sell home appliances, as well as travel and holiday packages. Food and beverages are a possibility as well.
One of the things we like about Star Media is it has been disciplined with costs even though it is building new businesses and revenue streams.
It said dimsum’s total subscriber base — combining paid and non-paid groups — had recently surpassed one million. This is impressive considering the group said it spends less than RM15 million per annum on content licensing, a fraction of the cost of major streaming service players. The plan to have a strategic partner for dimsum is to help it expand geographically.
With Malaysia’s cooling property market, Star Media said it is not rushing to develop and monetise its 48-acre (19.43ha) land bank. It plans to co-develop its crown jewel in Bayan Lepas, Penang, entitling it to a share of gross development value. Plans for the development are still in the works.
Star Media’s rerating catalysts lie in its property development plans and expanding dimsum to more countries. Admittedly, these growth stories will take some time to pan out. However, with the counter trading at two standard deviation below its 10-year mean price over book value, we think its current valuation is too attractive to resist. — CGSCIMB Research, July 22