STAR Media Group Bhd is currently trading at a huge discount even with the clouded business outlook. As such, AllianceDBS Research has upgraded the stock to a buy, with a higher target price of 52 sen from a previous 34 sen.
“The stock is now trading below its net cash of 52 sen per share, which also implies that investors are getting its other assets such as property and printing plant for free,” said its analyst Abdul Azim Muhthar.
He noted that Star Media’s share price had fallen by 55% over the past 12 months, and this has brought the share price to a level he believed to be overly discounted.
The target price of 52 sen is also pegged to Star Media’s net cash per share, which should see support coming from the group’s share buyback programme, which it restarted on April 10, following an absence of over two years.
“Since then, it has acquired 4.9 million shares for RM1.3 mil at an average cost of 27 sen per share. The total shares bought back so far only represents 0.7% of its share base. In our view, the 38% discount to its net cash per share is excessive. Star Media’s sizeable cash hoard implies that it has the capacity to continue with the buyback programme. This could help provide support for its share price,” noted Azim.
Key catalysts include greater traction on its digital transformation and products, with its dimsum streaming service having seen increased viewership following the Movement Control Order (MCO) issued by the government.
At the same time Star Media also has 19 sen per share in property assets, and the redevelopment or disposal of these properties could help unlock value, though this may take some time due to the soft property market.
“We now expect Star Media to record a RM3.6 mil net loss in its 2020 financial year, from a net profit of RM6.6 mil previously, as slower economic activity has weighed down on adex,” said Azim.
At 11.17am, Star Media’s shares were traded at 34.5 sen, up 3 sen, with 13.1 million shares traded. — April 20, 2020
