PETALING JAYA: MIDF Research has upgraded Star Media Group Bhd
to “neutral” from “sell” previously with a higher target price of RM2.46.
The research house said Star Media group was slowly shifting its business model which predominantly places heavy reliance on the print and digital segment. This is done by putting more emphasis on the exhibition segments, amongst others.
“In addition, at current trading price, we view that the share price provides an attractive dividend yield of approximately 6% which is supported by its healthy cash level. All factor considered, we are upgrading our recommendation to ‘neutral’ from ‘sell’ previously,” MIDF said in a report.
Star Media Group is disposing its entire stake in Capital FM Sdn Bhd (CFSB) to Astro Malaysia Holdings Bhd for a total cash consideration of RM42mil. The proceeds from the disposal are mainly to fund Star’s working capital.
Following the disposal, Star will still own two wireless radio stations, 988 FM (98.8) and Suria FM (105.3).
The purpose of the disposal is to streamline Star’s businesses to concentrate on profitable operations while divesting those that do not contribute significantly to the group’s financials.
“Given that Star’s entire radio segment is loss-making, we do not discount the probability that Star may totally exit the radio industry should it choose to dispose the remaining two wireless radio stations,” MIDF said.
The research house is positive on the media group’s effort to streamline its business operations as the move would enable the group to maintain a healthy cash level to fund its working capital and to remain dedicated to its dividend commitments.
For FY15, CFSB recorded a loss after tax of RM4.1mil, in comparison to the group’s total earnings of in FY15 of RM133mil. Excluding the loss from CFSB, Star’s FY15 earnings would have been higher marginally by approximately 3%.
“We view that the exclusion of CFSB’s FY16 and FY17 contributions would only lift Star’s bottomline marginally. As such, we are maintaining our earnings estimates at this juncture,” MIDF said.
In acknowledgement of the group’s effort to improve its financial standing, MIDF said it took a longer term view on the group. As such, it has migrated its valuation methodology from price-earnings ratio valuation to dividend discount model valuation.
“We arrive at a revised target price of RM2.46 per share,” MIDF said.
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