PETALING JAYA: Star Media Group Bhd’s share price jumped 20.59% or 11 sen to 62 sen today, as the counter topped Bursa Malaysia’s active stocks list with 109.8 million shares traded.
This comes after yesterday’s announcement that business media group The Edge Communications Sdn Bhd and its owner Tong Kooi Ong acquired a combined total of 39.34 million shares for a 5.42% stake in Star Media, making them substantial shareholders.
This buy-in made them the second largest shareholder in the nation’s largest English daily, behind political party MCA which owns 44.5%.
Interestingly, in an article penned by Tong and investment adviser Asia Analytica in the “Tong’s Portfolio” column in The Edge (April 24-30 issue), he looked at “deep-value stocks” which were trading below book values.
Among a list of such companies highlighted was Star Media which had a net cash position of RM351 million, above its market capitalisation of RM250 million, resulting in a negative enterprise value of -RM101 million.
The article said that oftentimes companies trade at discounts to their value because investors are not patient enough to wait for the value of the assets to crystallise. As an example, land-banking takes years to develop, before it can be translated into earnings, cash flow, and returns to shareholders.
“In these cases, opportunity arises when the company unlocks the value of its assets, usually coinciding with the emergence of new substantial shareholders,” it added.
Tong revealed his Global Portfolio and Malaysian Portfolio had raised their stake in Star Media last week.
In an internal memo to The Edge staff, Tong said the Star acquisition was “purely an investment”.
“This is an investment in a company whose share price and capitalisation have for several years been well below the cash it has, and the value of its property assets. It has no debt and is clearly undervalued,” he said.
Whether The Edge and Tong will acquire a bigger chunk of Star Media moving forward remains to be seen. The renewed interest in Star Media in recent days may indicate that some investors are banking on that possibility.
Who still reads newspapers?
Before the share acquisition, Star Media was already one of the best-performing stocks on Bursa Malaysia, with its shares surging 105% since the beginning of the year.
The company returned to the black in 2022, posting RM7 million in net profit. This comes after two years in the red, posting a net loss of RM20 million in 2020 and RM132 million in 2021.
Revenue also rose by 16% to RM187 million, as print and digital segments performed better coming out of the pandemic.
While the turnaround has been promising, Star Media’s financial performance has been far below its historical levels, with revenue tumbling from RM706 million in 2014 to about RM184 million in 2022.
In 2017, Star disposed of a RM360 million stake in Lucrum Investment. With that deal, the group gained RM214 million in profit, but lost a big chunk of its event and exhibition revenue source.
Star Media has disclosed that it has utilised about RM208 million of the proceeds from the deal to fund investments and working capital of the company.
However, those investments have yet to materialise.
The print media has sometimes been labelled as a “sunset industry”. The percentage of Malaysians reading physical newspapers has fallen to 17% in 2022 from 45% in 2017. However, the share of people reading news online has risen only slightly from 86% to 89% in the same period.
Ultimately, Star Media’s growth prospects are derived from advertising revenue for its print and digital, and radio segments, which faces the daunting challenge of growing their audience.
The low valuation and turnaround in financials may have fuelled the group’s sharp share price jump. However, it is unlikely that it will return to its former glory anytime soon. - FMT
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