The Edge buys 5.42% stake in Star Media: What this could mean for the future of the publication

Media platform, The Edge and its owner, Tong Kooi Ong, has bought out a 5.42% stake in Star Media Group (SMG). SMG is the publisher of the English newspaper The Star. Following this buy-out, The Edge will be a substantial stakeholder in SMG.

According to filings with Bursa Malaysia, as seen by A+M, reflect that Tong owns a direct interest of 1.84 million shares, or 0.25% stake, as well as 37.5 million shares or 5.17% indirect interest in The Edge Communications. Malaysian Chinese Association (MCA) is the controlling shareholder holding 45.4% equity interest. 

According to reports by The Edge Markets, Tong said in an internal memo to staff that the acquisition is purely for investment purposes.

“This is an investment in a company whose share price and capitalisation have for several years been well below he cash it has, and the value of its property assets. It has no debt and is clearly under value,” he added, according to the report.

Don't miss: The Edge SG launches new print magazine titled 'WOMAN'

What can we glean from this investment?

CEO of Ampersand Advisory, Sandeep Joseph said that the investment by Tong shows his belief that The Star is undervalued. Joseph pointed out that The Star’s share price has risen by 50% in the past six months, which he deems could mean that the market thinks the stock still has upside.

“As a media investment company, we have a lot of respect for a long-standing publication like The Star. At the same time, we see a slight shift of the pendulum in the market away from digital advertising towards digital and offline when judiciously used,” he added. However, even though print is still standing firm in its ground and competing with radio and TV, Joseph posited the caveat that he does not foresee a return for The Star to the days when “it was over 60 pages thick and filled with advertisements.”

Additionally, The Edge is read by the top echelons of the Malaysian society resulting in its reach being primarily amongst influencers, according to Ranganathan Somanathan, the co-founder and curator of Rsquared Global Ventures. “With shareholdings of above 5% of Star Media, if they choose to become and active investor, they might be in a position to have a say in the editorial evolutions of the company over time,” he added.

When zoomed out, the bigger purpose according to Somanathan is to help political parties sell their ownership of media companies, to create a more independent media ecosystem in the market. “In which case, this might be the beginning of transfer of ownership of media stocks at a fair valuation, in due course,” he added.

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