Print media suffers with drop in adex on poor sentiments

Analysts caution that it may take a while before any financially significant turnaround can be achieved


Times are hard for the print business — with media giants stumbling to correct their footing after recording dismal performances in terms of ratings, as well as advertising revenue in the recent quarter.

As poor consumer and business sentiments affected the overall advertising expenditure (adex), media companies are embarking on digital initiatives to enhance and complement their products, while analysts have cautioned that it may take a while before any financially significant turnaround can be achieved.

Star Media Group Bhd

Star Media recorded a fall of 80.5% in net profit for its second-quarter ended June 30, 2017 (2Q17).

Its net profit dropped to RM8.51 million from RM43.68 million a year ago, due to lower profit from the print and digital segments.

The decline was also due to poor consumer and business sentiments that affected the overall adex.

The group posted a pretax loss for the first time in 2Q17, recording RM1.48 million compared to a pretax profit of RM34.56 million in 2Q16.

Quarterly revenue also declined 21.8% to RM129.38 million from RM165.54 million a year ago.

In a filing to Bursa Malaysia, Star Media said its print and digital revenue declined 22.3% year-on-year (YoY) in 2Q17 due to lower advertising revenue caused by poor market sentiments.

The segment’s pretax profit fell to RM2.99 million from RM23.02 million in 2Q16.

The weak 2Q performance dragged its net profit for the first-half of this year (1H17), down 74.4% YoY to RM15.16 million from RM59.17 million, while revenue dropped 19.5% YoY to RM260.51 million from RM323.44 million.

“Newspaper adex fell 23.4% in 1H17 compared to the first six months of last year.

“As a result of the lower revenue, pretax profit decreased to RM11.09 million in 1H17 compared to RM50.18 million in 1H16,” it added.

The firm said it will search for new investment opportunities, especially in the digital sector, to further complement and enhance its assets.

The media group also said it will continue to defend its print segment, while building on other media platforms and continue its prudent cost management.

Public Investment Bank Bhd said in a note that the research firm is not surprised by the distribution of special dividend by Star Media.

“Star Media declared a special dividend of 30 sen per share and first interim dividend of six sen per share, payable on Oct 17, 2017.

“This brings a total dividend per share for 1H17 to 36 sen (1H16: Nine sen), or a yield of 15.1%.”

Meanwhile, MIDF Research remains concerned on the future outlook of the group, should there be no earnings accretive acquisitions in the pipeline.

All factors considered, MIDF and Public Investment are maintaining their ‘Neutral’ stance on Star Media.

Media Prima Bhd

Media Prima, the country’s biggest integrated media group, has incurred a loss of RM171.37 million for 1H17, compared to a net profit of RM45.16 million a year earlier.

Based on its latest results, the media giant remained in the red for the third consecutive quarter.

For 2Q17, it recorded a net loss of RM132.9 million, or a loss per share of 12 sen, against a net profit of RM27.9 mil- lion, or earnings per share of 2.52 sen, in the corresponding quarter last year.

Revenue for the quarter decreased 6% YoY to RM328.8 million from RM349.6 million over the same period a year ago.

Bloomberg data shows that out of the 16 analysts who cover Media Prima, 10 have a ‘Sell’ call, four have a ‘Hold’ recommendation and two have a ‘Buy’.

Media Prima is also known as the group behind media outlets such as the New Straits Times and TV3.

Analyst reports stated that the ongoing shift in consumer preference towards digital media is also negatively affecting the adex share for traditional platforms.

Additionally, MIDF believes that Media Prima’s traditional core businesses will continue to negatively impact the group’s overall financial performance.

“This has led the company to rethink its business models where it is now aiming to grow revenue from the non-advertising, non-TV/print, international and digital segments.

“While we applaud the group’s effort to reform, we do not expect any financially significant turnaround in the near term. This will inadvertently impact the group’s cash-generating ability, which would in turn place the group in a tight financial position,” it said.

Utusan Melayu (M) Bhd

The group — which publishes Utusan Malaysia, Mingguan Malaysia and Kosmo — saw its quarterly revenue drop 7.3% to RM53.83 million in 2Q17 from RM58.08 million in 2Q16, mainly due to lower advertising revenue.

For 1H17, revenue fell 9.9% to RM95.34 million from RM105.82 mil- lion in 1H16, due to a reduction in revenue from the advertisement segment.

However, its net loss narrowed to RM10.68 million in 2Q17 from RM16.26 million a year ago on lower operating costs.

“The overall decline in revenue of 9.9% was cushioned by lower operating costs, mainly attributed to a significant decrease in raw material costs,” it said in a filing to Bursa Malaysia.

“While our core business remains in print media, we are actively seeking new businesses to support our core business activities.

“The property and information technology sectors are the new business segments that we have identified and (are) currently exploring,” Utusan Melayu added.

The stock fell 4.5% in the past month, returning 9.1% so far this year and a loss of 12% in the past 52 weeks.

Utusan Melayu closed unchanged yesterday at 40 sen, with a market capitalisation of RM47.06 million.

Berjaya Media Bhd (BMedia)

The Sun Daily’s publisher fell into financial distress, leading it to be classified as a Practice Note 17 company by the Bursa Malaysia last month.

In an announcement on Bursa Malaysia, the decision was made following the release of its unaudited financial results of its 4Q17.

Based on the unaudited interim financial results of BMedia for 4Q17, the shareholders’ equity of BMedia on a consolidated basis of less than RM40 million represented 25% or less of its issued capital.

BMedia charted a net loss of RM14 million in that quarter, compared to just RM3.5 million loss in the same period in the previous year.

However, revenue expanded 6.2% to RM9.07 million for 4Q17 from RM8.55 million in the previous cor- responding period, driven by higher advertising income registered by its principal operating subsidiary Sun Media Corp Sdn Bhd.

BMedia’s net loss over the full financial year was RM21.12 million, from a revenue of RM42.7 million.

Going forward, BMedia said it will continue to focus on improving its advertising revenue.

Shares in BMedia last closed at 30 sen, a decrease of 4.67% with a market capitalisation of RM70.53 million.

The stock returned 38% so far this year and a loss of 13% in the past 52 weeks.