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The SUPERNOVA of STAR MEDIA (6084): A Burst of Earnings? [$$bill]

Publish date: Tue, 11 Apr 2023, 09:23 AM

The Supernova of Star Media: A Burst of Earnings?
Star Media, once a shining star in the newspaper industry, now faces the inevitable fate of a sunset business.
The dawn of digital media has cast a long shadow over traditional print newspapers, and The Star is no exception. But like a star in its final moments, there will be one last burst of light before it fades into obscurity — a phenomenon known as a supernova.
The recent move by Star Media to hike cover prices for its physical newspaper by 50% from RM2 to RM3, could potentially lead to a significant increase in earnings.
While more recent data is not available, for 2H2018, The Star had an average of 151,623 paid printed copies in circulation per publication day (audited and verified by the Audit Bureau of Circulations).
Assuming that The Star’s print circulation has now decreased by half to 75k per day, this would still equate to about 27 mil copies per year. A RM1 increase in cover price could potentially result in a boost of RM27m flowing directly to its bottom line. Assuming a daily print circulation of 100k or roughly 36 mil annually, the company can potentially see an earnings surge of RM36m.
This is, of course, assuming advertising rates and revenue won’t be heavily affected.
From a value perspective, the company possesses certain attributes that could offer a margin of safety or act as a buffer to its share price.
Notably, Star Media is in a net cash position of RM364.8m (50 sen per share) vs. its market cap of RM250m (share price 34.5 sen).
Star Media also owns valuable property assets worth RM143m, which could further bolster its value proposition. Most of its properties have not been revalued (AR2021).
After incurring losses in FY20-21 due to the Covid-19 pandemic, the company returned to profitability in FY22 with a net profit of RM6.9m, and declared a first and final dividend of 1.0 sen, marking a resumption of dividends after a hiatus in FY20-21.
There has been notable activity among major shareholders lately. While second-largest shareholder ASB has been selling, largest shareholder MCA has been actively purchasing shares from the open market since the beginning of the year.
Given the recent developments, it will be interesting to see how things unfold.

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Disclaimer: All information here reflects the author’s personal views/thoughts and should not be considered as investment advice. It is very important to do your own analysis before making any investment based on your own personal circumstances. No content here constitutes - or should be understood as constituting - a recommendation to enter in any securities transactions.

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