The slow death of media stocks?

The combination of a sombre stock market, sluggish ad market and weak consumer spending has proved deadly for media stocks, especially recently

By DASHVEENJIT KAUR / Pic By BLOOMBERG

It was predicted over 10 years ago that the print media, along with some of its electronic counterparts, would be obsolete as more consumers began to move into cyberspace.

As more people are keeping abreast of the latest news while managing their lives via all the more versatile mobile instrument and gadgets, the traditional media world continues to shrink.

Today, glance at all the media companies’ stocks and one could actually feel the struggle among even the giants to stay afloat.

The combination of a sombre stock market, sluggish advertising markets and weak consumer spending has proved deadly for media stocks, especially in the most recent times.

A check on Bloomberg shows that the already-suffering media stocks listed on Bursa Malaysia Bhd have been battered over the past one year.

The five notable media companies, namely Utusan Melayu (M) Bhd, Star Media Group Bhd, Astro Malaysia Holdings Bhd, Media Prima Bhd and Berjaya Media Bhd have seen their share prices almost halved over the last 52 weeks.

Adding to that, the market capitalisation of the five companies have also been decreasing over 50% within 12 months.

Downward Spiral

Out of the five listed media organisations, Utusan and Berjaya Media have fallen under the classification of Practice Note 17 (PN17) companies.

Utusan’s financials were inadequate as a listed entity, while Berjaya Media has been recording nothing but a widening quarterly net loss.

Media Prima stood out as the only organisation among the five to have returned to black in its recent quarterly earnings, while both Astro and Star Media fell 93.3% and 83.4% respectively in their second-quarter (2Q) net profit.

Umno-linked Utusan

Utusan has been on a losing streak, chalking up a loss of RM5.8 million for its 1Q ended March 31, 2018. In the same period last year, it lost RM22.8 million.

Over the course of the 52 weeks, Utusan’s share price has reduced by 58.97% to close at 16 sen apiece last Friday compared to 39 sen last year.

The company has been bleeding over the past few years. Its shareholders’ fund declined to RM89.9 million with accumulated losses of more than RM71 million as of end-June this year.

Matters seem to have gotten even more out of hand when Umno-led Barisan Nasional was defeated on May 9 this year, as the company had been depending on the previous government’s assistance to stay afloat two years ago.

Utusan’s cashflow has been so tight that it had to call for a private placement exercise of up to 10% of its issued shares to raise a measly RM2.1 million to repay its borrowings.

On Aug 20, the Malay language newspaper and publisher was classified as a PN17 company as it defaulted in its principal and profit payment to Maybank Islamic Bhd and Bank Muamalat Malaysia Bhd, totalling RM1.18 million.

Utusan was also unable to provide a solvency declaration to Bursa Malaysia.

Furthermore, the Labour Department has recently notified the Human Resources Ministry on Utusan’s plans to offer a voluntary separation scheme (VSS) to all its 1,300 workers due to the company’s financial problems and unstable condition.

As reported by a local newspaper, Utusan intends to make the VSS payment via instalments.

This came after the Kuala Lumpur Labour Office probed the issue on Utusan’s failure to pay its staff salaries.

The company is also recently sued by two companies seeking refunds of their deposits that totalled RM18.5 million.

Nylex (M) Bhd claims that Utusan has failed to refund a RM10 million deposit, which was remitted pursuant to letters of “Advertising, Branding and Communication Exercise by Nylex Group of Co through Utusan Malaysia and Mingguan Malaysia” dated Jan 29 and Feb 27.

Meanwhile, Redberry Sdn Bhd’s claim states that Utusan has failed to refund an RM8.5 million deposit paid for “Advertising, Branding and Communication Exercise by Redberry Media Group through Utusan Malaysia and Mingguan Malaysia” dated April 30.

The Largest Circulated English Daily — Star Media

The change in government following the 14th General Election (GE14) has cast a cloud of doubts on politically-linked media groups.

Among the speculations is whether the country’s new direction would also lead to a change of ownership in companies like Star Media.

While the public seems to have steered away from many mainstream media platforms, Star Media’s net profit plummeted 83.4% to RM1.41 million in 2Q ended June 30, 2018, from RM8.51 million a year ago, as the print and digital segment saw a drop in momentum in advertising spending after GE14.

Shares of Star Media declined 54.78% to close at 80 sen last Friday, the lowest since 2007.

Its market cap has also dropped by half in the last 52 weeks from RM1.65 billion to only RM593.99 million as of last Friday.

Star Media’s stocks were priced at RM1.78 apiece a year ago and has returned a negative 49% so far this year.

Hong Leong Investment Bank Bhd (HLIB) said in its recent note after Star Media’s analyst briefing that the group has to look for a new direction.

“Traditional media continues to face digital disruption and the outlook of the company remains subdued with challenges from the declining newspaper circulation, weak consumer sentiment and economic uncertainties.

“As such, we do not see a potential growth catalyst moving forward,” HLIB added.

In its ongoing cost-rationalisation exercise, Star Media also announced that it has ceased its printing operations in Bayan Lepas, Penang, effective September 2018.

The analyst consensus rating on Star Media is equivalent to ‘Sell’.

Pay-TV Operator Astro

The country’s largest pay-tv provider saw its 2Q net profit sink by 93.3% to RM16.6m from RM246.3m (Pic: Bloomberg)

Owned by Malaysia’s fourth-richest person T Ananda Krishnan, sovereign wealth fund Khazanah Nasional Bhd, and state-owned pension fund Employees Provident Fund, Astro has had a ride of its own this year.

The new government’s decision to show 41 out of the 64 matches of the FIFA World Cup for free on Radio Televisyen Malaysia and the leak involving Astro customers’ data have placed the shares of the group on the wrong spotlight.

Its share price has slumped by 46.48% over the last 12 months to close at RM1.50 from RM2.84 apiece one year ago.

Astro’s market value was also slashed by half to RM7.93 billion last Friday compared to RM14.71 billion last year.

Analysts from Kenanga Investment Bank Bhd and MIDF Amanah Investment Bank Bhd have also downgraded the stock.

In the past year, the stock had a similar or greater loss 19 times and was little changed the next day.

It declined seven times for an average of 2.6% and advanced 10 times for an average of 2.3%, according to Bloomberg.

Kenanga Investment analyst Cheow Ming Liang downgraded the stock to ‘Market Perform’, while MIDF’s Martin Chuan Loong Foo downgraded it to ‘Neutral’.

Astro’s stock has returned a negative 43% so far this year trading at 14.7 times trailing 12-month earnings per share and 12 times its estimates for the coming year.

The country’s largest pay-television (pay-TV) provider saw its net profit for the 2Q ended July 31, 2018, sink by 93.3% to RM16.6 million, or 0.32 sen per share, from RM246.3 million, or 4.73 sen per share, in the previous corresponding quarter.

Advertising expenditure (adex) revenue fell 23% year-on-year due to the three-month tax holiday, with Astro not benefitting from the political funding during GE14.

The Sun’s Berjaya Media

Despite losing only seven sen, or 23.64%, in stock market price over the last one year, the owner of Malaysia’s first national free daily newspaper is not far behind from being delisted due to increasing net loss over the last one year.

Categorised under the PN17 status last year, Berjaya Media reported a bigger loss in its latest quarterly financial results mainly due to a decrease in revenue.

The loss for its 1Q ended July 31, 2018, widened to RM2.75 million from RM1.49 million a year ago. Loss per share rose to 1.17 sen from 0.63 sen.

The company has a market value of RM49.37 million, less than half of last year’s RM90 million. Its stock has returned a negative 26% so far this year.

The key factors that affect the ope- rating performance of the group include mainly newsprint cost, press printing cost, payroll cost, economic conditions and the demand for newspaper advertising.

In a filing to Bursa Malaysia, Berjaya Media said it will continue to focus on containing its cost and improving advertising revenue.

But it expects conditions to remain challenging amid prevailing economic conditions, which will impact the advertising and promotion bud-gets of most corporate clients and advertisers.

Return to the Black — Media Prima

The company has seen its share price decreasing as much as 40.51% over the past 52 weeks, from 79 sen to 47 sen apiece.

However, Media Prima is seen slowly getting a grip of the digital transformation that is required for it to stay afloat in this age and time.

It was once a billion-dollar entity in market value, but today it’s half way through getting back to where it was.

The good thing is that, Media Prima has returned to the black with a net profit of RM8.7 million for the first half of this year, its first quarterly profit since 4Q16.

It was a sharp reverse from a net loss of RM179.7 million in the same period a year ago on the back of its ongoing business transformation initiatives to become Malaysia’s leading digital-first content and commerce company.

Acclaimed as the largest local integrated media group, Media Prima, however, has raised analysts’ concerns on it being continually bogged down by its traditional businesses, which naturally have larger asset and cost bases than their digital counterparts.

Decline of Ad Industry

As media stocks were already in a nosedive, it is being hit by concerns about the downturn in advertising markets, big debts at some companies and the uncertain future of media categories such as newspapers and magazines.

Nielsen Media Research’s latest adex figures show that total advertisement spend in Malaysia for the 2Q declined by 8.1% to RM1.58 billion compared to RM1.72 billion in the same quarter in 2017. The figures exclude pay-TV, outdoor and digital media.

On a month-on-month comparison, total ad spend for August 2018 was lower at RM488.2 million against RM571.2 million in the same month of 2017.

In terms of ad spend by medium, newspapers in 2Q declined by 19.6% against the same period in 2017.

In terms of ad spend share, newspaper was lower at 37.7% in 2Q against 43.1% in the same period last year.