KUALA LUMPUR: Continuous uncertainties surrounding the Malaysian Chinese Association’s (MCA), could dampen Star Media Group Bhd's share price in the near term.
MCA, which holds 43 per cent stake in the media company, is currently undecided whether it to continue to be a component party in Barisan Nasional (BN), with most of its service centres shutting down due to lack of funding.
AllianceDBS Research in a note further said with the changing landscape for media industry in Malaysia and abolishing the Printing Presses and Publication Act 1984 - which is part Pakatan Harapan’s election manifesto -
will encourage potential new entrants into the sector, which could be a threat to Star’s dominant position in English-language newspapers.
"Star's print adex revenue is in a structural decline and
has been on a downtrend since 2012, and the accelerating pace of decline suggests that it is becoming more of a structural issue rather than cyclical, in our view," AllianceDBS noted.
Anecdotal evidence would point to the structural shift towards online and digital media which is getting more attention from advertisers, it said further.
Star posted a net profit of RM11.3 million for the first quarter (1Q) 2018 which came within AllianceDBS' expectations, accounting for 27% and 25% of the research firm's and consensus full-year forecasts respectively.
In addition to adex revenue, sales from the print segment remained weak in 1Q18, having fallen by 11% year-on-year (yoy).
Nevertheless, AllianceDBS noted that this segment was able to record a higher profit (more than doubled yoy) mainly due to lower salary costs and depreciation expenses.
To recap, Star made a few major impairments in the fourth quarter 2017 (4Q17), which include a RM34 million goodwill impairment, a RM87 million property, plant and equipment (PPE) impairment and write-off, and a RM56 million of mutual separation scheme expenses.
AllianceDBS has revised its take profit for Star to
RM0.94, based on 0.8x book value (BV) and maintains Hold call for the stock.