Star Media’s pivot towards real estate, niche publications need time to show earnings traction, says Kenanga

• Kenanga said that despite Star Media’s various initiatives, it is still too early to turn positive at this juncture.

KUALA LUMPUR (April 1): Kenanga Research has maintained its “underperform” rating on Star Media Group Bhd at 42 sen with an unchanged target price of 31 sen and said Star Media is pivoting towards real estate and offering niche weekly publications.

In a note on Monday, the research house, however, said it is still early days as these ventures require time to show meaningful earnings traction.

“As such, we remain cautious of sustained losses in its traditional media business due to adex (advertisement expenditure) share erosion by digital media,” it said.

Kenanga said that despite Star Media’s various initiatives, it is still too early to turn positive at this juncture.

“Our assumption is less bullish versus Star Media’s targets as we are concerned that sales traction may be dragged by ample incoming supply of industrial units in the market.

“To recap, as at December 2023, there were circa 4,000 units thought to be under construction, while total units stood at circa 121,000 units.

“Whereas for its rental properties, the group targets to deliver rental income of RM6 million in FY2024, matching FY2023's collection (FY2022: RM3 million),” it said.

Kenanga said these flattish expectations may have accounted for robust upcoming supply.

“In 1HFCY2024 (first half of calendar year 2024), five new office buildings in Klang Valley are expected to reach completion, including Felcra Tower, and The Exchange TRX Office by Lendlease at KL City.

“Thus, this is expected to boost existing stock and suppress the overall purpose-built office occupancy rate of 78.6% as at end-December 2023 (June 2023: 79.0%).

“Lastly, Star Media is in its early days of building its portfolio of niche publications, having just launched two within its stable.

“Therefore, we believe that earnings contributions from these magazines are not likely to be meaningful at this juncture. On the bright side, we do not discount the possibility that this will turn around as readership builds up over time,” it said.

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