This article first appeared in The Edge Malaysia Weekly on November 27, 2023 - December 3, 2023

THERE are a lot of questions about the operations and profitability of Star Media Group Bhd, with little to no indication of what lies ahead for the company.

Early last week, when Star Media, which publishes and prints The Star, the top English-language daily for both weekly offline and online reach, announced its unaudited financial results for the third quarter ended Sept 30, 2023 (3QFY2023), the dark cloud already hovering over the company darkened significantly.

For its nine months ended Sept 30, 2023 (9MFY2023), Star Media only managed to muster a meagre net profit of RM1.98 million on the back of RM164.93 million in revenue, in contrast to RM6.53 million in net profit from RM160.97 million in the previous corresponding period. More worrying were the numbers for 3QFY2023, in which Star Media only chalked up a paltry net profit of RM56,000 on RM54.92 million in revenue. In contrast, for 3QFY2022, Star Media managed to register a net profit of RM2.2 million from RM54.43 million in revenue.

On what can be done to revive the media company, Datuk Seri Wee Ka Siong, president of political party the Malaysian Chinese Association (MCA), which holds 46.07% equity interest in Star Media, says in a brief phone conversation, “I need to talk to the Star Media board of directors (to decide what to do). But all media (companies) are having the same problem(s) … but I want it (Star) to turn positive.”

For the 9MFY2023 period, almost 83% of Star Media’s revenue came from its print and digital media and events.

Wee’s concern about the business is justified because while Star Media may post a small profit for FY2023, there are worries about its media business — the mainstay of the group, given that for 9MFY2023, the group managed to see a profit only because of its investment income.

But then again, MCA, which was once a key player in the government as the second-largest component member of the Barisan Nasional coalition, is no longer the powerhouse it once was. So, how it plans to drive things at Star Media remains to be seen.

For the nine months in review, Star Media’s operating expenses surpassed its revenue, or put another way, the company suffered an operating loss. Its operating expenses of RM174.53 million for 9MFY2023 amounted to 5.5% higher than its revenue of RM164.93 million. However, Star Media’s operating expenses have been higher than its revenue since FY2017 or for the last six years.

In other words, Star Media only managed to make a profit because of other operating income or investment income as notes to its financials reveal. For 9MFY2023, Star Media’s investment income was RM9.56 million. What these investments are is not clear but sans the investments, Star Media would have been in the red.

It is also noteworthy that the cover price of its flagship, The Star, was increased in April this year to RM3 daily from RM2­ — a move that was unpopular as the jump at 50% was deemed too much. 

This increase may help offset newsprint costs, which, according to the company’s 2022 annual report was up close to 50%, from RM5.79 million in FY2021 to RM8.67 million that year. The ringgit’s weakening against the US dollar added to the strain on Star Media’s bottom line.

While the group has a strong war chest, what is being done with it is unclear. As at Sept 30, 2023, Star Media’s deposits placed with licensed banks amounted to RM346.24 million while its cash and bank balances stood at RM17.35 million (RM363.59 million in total), but the media player’s interest income was a mere RM356,000.

Star Media, which had negligible short- and long-term borrowings, paid RM597,000 in finance costs for 9MFY2023.

As at Sept 30, Star Media’s net assets per share stood at 89 sen, in stark contrast to its Thursday close of 42 sen, which translates into a market capitalisation of RM304.42 million. Star Media’s war chest of RM363.59 million works out to 50.16 sen a share.

On its venture into property development, Star Media said in its 2022 annual report that it “has seen promising results with secured sales of its maiden Star Business Hub project, consisting of offices, factories and warehouses in Bukit Jelutong, Shah Alam”.

Star Business Hub has an estimated gross development value of RM130 million and comprises five office complexes-cum-warehouses.

Star Media also owns land in Bayan Lepas, Penang and Shah Alam, Selangor.

In Bayan Lepas, it has a 1.78-acre industrial parcel with a net book value of RM11.95 million that was last revalued in 1997 and another 4.81-acre parcel with an office building and plant with a net book value (NBV) of RM15.58 million but last revalued in 2002.

In Shah Alam, Star Media owns three pieces of land — one that is 150 acres in size, on which the company’s printing plant is located, with a NBV of RM48.58 million but last revalued in 2000; a 26-acre industrial tract with a NBV of RM4.38 million and last revalued in 2004 and a 27-acre piece of industrial land with a NBV of RM4.44 million but last revalued in 2004. The value of these pieces of land could have increased significantly over the years.

Star Media also says in the 2022 annual report that “with a strong and healthy financial position, the group is on the lookout for merger and acquisition opportunities, including penetrating new businesses that have a promising outlook. Amid challenges in the media industry landscape, the Board is confident the group will achieve a satisfactory performance in 2023”.

Analyst reports have it that Star Media’s five-year target is 34% contribution to revenue from media, 33% from property development and 33% from new businesses.

However, for 9MFY2023, Star Media’s property arm only managed to make a profit of RM391,000 from RM7.62 million in sales.

It is unclear what the new businesses that Star Media is eyeing are.

One deal involving Star Media that went sour created quite a stir for all the wrong reasons. In May this year, Star Media sought to sell a factory and warehouse in Shah Alam to MCA-controlled plantation outfit Matang Bhd for RM33 million in a share and cash deal. MCA has a 17.69% stake in Matang.

In Star Media’s virtual extraordinary general meeting held at end-May, 46% of the shareholders who were present holding 81.7% of voting shares rejected the resolution. If the deal had received the shareholders’ nod, Matang would have satisfied RM28.9 million of the purchase consideration via the issuance of 357 million new Matang shares at 8.09 sen apiece to Star Media, resulting in it controlling 13% of the oil palm company with a land bank of about 1,094ha. The sale of assets by Star Media to Matang for shares was termed by some as “value destructive”.

Another problem that Star Media is facing is the uncertainty about the leadership of the company. CEO Alex Yeow Wai Siaw’s contract expires in February next year and is unlikely to be renewed, as announced to Bursa Malaysia. Insiders also say Tan Sri Chor Chee Heung, who has been the chairman since March 2021, is looking to leave as well.

Thus far, no replacements have been announced.

Yeow is understood to have been brought in to increase non-print revenue. However, it is understood that he is leaving after a fallout on remuneration, among other things.

Former managing director Datuk Wong Chun Wai, who has an advisory role at Star Media is understood to have had his contract extended.

Since end-2018, or over the last five years, Star Media has had three different leaders at the helm, all of whom have been unable to arrest the group’s slide.

In FY2014, Star Media posted a net profit of RM111.42 million on revenue of RM1.01 billion. Since then, the decline has been steady.

The new person at the helm of Star Media will have his or her hands full.

Editor’s note: The Edge Communications Sdn Bhd, which publishes The Edge Malaysia, has a 5.17% interest in Star Media Group Bhd 

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