KUALA LUMPUR (Aug 21): Shares of Star Media Group Bhd (KL:STAR) rose on Wednesday following better-than-expected results before losing steam amid analyst cautions over uncertainties in earnings.
Star rose as much as 2.5 sen or nearly 6% to 44.5 sen before ending the day at 42 sen. At the closing price, the company has a market capitalisation of RM310 million. Trading volume totalled 4.29 million shares, more than double the 200-day moving average.
Net profit for the January-June period of RM7.3 million has already exceeded the consensus expectations at 189% of full-year estimates; however, analysts flagged ongoing macroeconomic challenges, including inflationary pressures, that make advertisers cautious about their marketing spend.
“In the near term, we anticipate that Star’s core print and radio broadcasting segments will remain subdued,” said TA Securities. “However, we maintain our ‘sell’ recommendation on the stock due to its unfavourable risk reward potential.”
A stronger-than-expected recovery in advertising expenditure and traction with the group’s property development endeavours would be the key rerating catalysts for the stock, the research house noted.
Investors and analysts are largely cautious on Star. Shares of Star, which publishes the most circulated paid English newspaper in Malaysia, surged this month and peaked on Aug 13 with a nearly 23% rise before giving up all of the gains over the next few days ahead of the results announcement on Tuesday.
Out of four research houses covering Star, two rate the stock ‘sell’ and two recommend ‘hold’. The consensus 12-month target price is 40 sen, implying a potential loss of 7% from its last price.
The company has been grappling with dwindling subscribers and advertising revenue amid proliferation of online news and media. Star diversified into property business, developing the Star Business Hub, a 5.05-acre industrial site in Shah Alam, Selangor.
Star will remain profitable in July-December 2024 on billings from property sales, which will continue to anchor earnings in 2025, said Kenanga Investment Bank.
“We believe there is increased likelihood of Star monetising its land bank via development of new projects” as the company has valuable industrial and commercial lands in Penang and Perak, the research house noted.
Beyond 2025, however, earnings visibility remains “murky”, unless it develops a new project or diversifies further, Kenanga flagged.