The six-year legal dispute between Star Media Group Berhad and JAKS Resources Berhad, centred around a development project for land in Section 13, Petaling Jaya, has officially concluded following a formal settlement. This long-standing case, initiated in 2018, involved complex claims and counterclaims related to the terms of the development. With the recent agreement, both parties have agreed to withdraw all legal proceedings and counterclaims permanently, bringing an end to all associated litigations. This settlement enables Star Media to recognize the RM50mn bank guarantee—initially called in February 2018 and released in January 2019—as "Other Income" in FY24. While there is no impact on core earnings, we expect an increase of approximately RM0.07 in EPS and NTA per share for FY24 due to this one-time recognition. We maintain our TP at RM0.44, based on a P/BV of 0.45x on CY25F BV. Following a recent price decline, we have upgraded our recommendation from Sell to Hold.

Summary of Settlement

• Parties Involved: Star Media Group Berhad and JAKS Resources Berhad

• Dispute Overview: A prolonged six-year legal battle regarding the terms of a development project on land in Section 13, Petaling Jaya.

• Settlement Terms: Both parties will withdraw all legal claims and counterclaims with no option for refiling, concluding all related disputes.

• Financial Impact: Star Media can now record the RM50mn bank guarantee received in January 2019 as "Other Income" in FY24, though this does not generate new cash flow.

Impact

• As this is a one-time gain and the funds were received previously in January 2019, we make no adjustments to core net profit.

• However, we have revised our FY24 topline forecast to include the RM50mn settlement. Consequently, we expect an increase of RM0.07 in EPS and NTA per share for FY24.

Valuation & Recommendation

• We maintained our TP for Star at RM0.44 based on a P/BV of 0.45x CY25F BV, which is aligned with the stock’s 5-year P/BV. Due to the recent price drop, we have upgraded our recommendation on the stock from Sell to Hold.

• We view a stronger-than-expected recovery in adex and traction with the group’s property development endeavours as key rerating catalysts for the stock.

Source: TA Research - 5 Nov 2024