Frankly Speaking: No shine in Star Media’s disposal

TheEdge Mon, Feb 20, 2023 12:00pm - 1 year View Original


Star Media Group Bhd has all the elements required to diversify into property development to shore up declining revenue and profitability at its media business. The company is sitting pretty on a cash pile of RM354 million and has parcels of land in decent locations to facilitate a relatively cheap entry into property development.

The company, which is majority-owned by MCA, could always set up a property development arm. Or it could team up with an established contractor or developer that has an excellent track record.

But that is not the strategy taken by Star Media.

In its latest announcement, Star Media proposed to dispose of a piece of land in Bukit Jelutong to Matang Bhd for RM33 million. It is a related party transaction as MCA is the common shareholder in both companies.

Star Media will receive RM4.1 million in cash and the rest in shares that will translate into 13% of Matang.

According to the announcement, the disposal is pursuant to a development rights agreement between Star Media and Matang on Aug 18, 2021, whereby the latter was granted the right to develop and sell units to be constructed on the land.

This is not Star Media’s first foray into property development. In August 2011, it entered into an agreement with a subsidiary of Jaks Resources Bhd for the development of land in Section 13, Petaling Jaya. The development was supposed to be completed in February 2018, with Star Media getting a tower in the project.

However, the development ran into delays, resulting in Star Media taking legal action against the developer. The case is still pending and Star Media has yet to take delivery of the tower.

After that episode, one would think that Star Media would choose to develop other parcels of land on its own or at least have better control over the development. But that does not seem to be the case.

While the deal would be good for Matang because it represents a cheap entry into developing a prime parcel of land, what is the return for Star Media’s shareholders?

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