Is Media Prima the target for a take-over?

KUALA LUMPUR: The interest shown in Media Prima Bhd by investors, despite its losses, is puzzling.

It could indicate the possibility that someone may be interested in acquiring the Umno-affiliated conglomerate involved in the TV and print business, including TV3 and The New Straits Times.

Media Prima has seen a substantial rebound in its share price over the past month – up almost 25% to close at 85.5 sen last Thursday.

The rally comes despite widespread “sell” and “hold” calls by analysts after the company announced a substantial loss of RM132.9 million in its second quarter ended June 30, according to a report in The Edge.

Bloomberg had earlier said the average 12-month Media Prima target price by analysts was only 74 sen.

The Edge reported that while Media Prima’s immediate earnings outlook might not justify the interest in the counter, a merger and acquisition exercise might.

It said that if one were to look past the loss-making operations, corporate raiders might see a company plump for asset stripping.

The Edge noted that Morgan Stanley was actively acquiring Media Prima shares on behalf of Mitsubishi UFJ Financial Group.

Since emerging as a substantial shareholder in Media Prima in early April, Mitsubishi UFJ has increased its holding to 8.93% as at Oct 17. Against Media Prima’s market capitalisation of RM948.4 million, Mitsubishi UFJ’s stake is worth RM84.7 million, the report said.

The Japanese fund picked up several hundred thousand Media Prima shares each day since April and this has piqued the curiosity of investors. What does it see that others do not?

The Edge report noted that despite the headwinds Media Prima had been battling against, the group had a relatively healthy balance sheet.

It is not cash-rich but it is relatively light on debt. Also, Media Prima has 56 acres of land, valued at RM230 million in its books, including buildings. But these are believed to be worth more than that.

For instance, the 3.5 acres of freehold land on which the New Straits Times Press (M) Bhd’s headquarters stands in Jalan Riong, Bangsar, is worth RM46.84 million, or RM308.69 psf, in Media Prima’s books.

However, property consultants told The Edge the land could easily fetch RM600 psf. A more realistic figure, they said, was RM800 psf.

Also, the report noted, the group’s home shopping and out-of-home advertising segments were doing well. Home shopping revenue more than doubled to RM59.7 million in the first half of this year.

In addition, the group has been cutting costs, including letting staff go.

According to the report the most suitable suitors for Media Prima are those with potential synergistic benefits – telecommunications companies and broadcasters.

In this case, Maxis Bhd, DiGi.Com Bhd, Axiata Group Bhd, Telekom Malaysia Bhd, Time dotCom Bhd and Astro Malaysia Holdings Bhd are the most likely candidates.

As Media Prima is seen as a company that must stay within the control of the government, the more likely candidates are Axiata and Telekom, according to The Edge.

This is because Axiata is 36.6% controlled by Khazanah Nasional Bhd while Telekom is 26.21% controlled by Khazanah.

The Edge report said Axiata and Telekom would have huge synergy with Media Prima. A merger with one of them would allow Media Prima to leverage the telecommunications infrastructure to distribute its TV and radio content.

However, the report said, any merger and acquisition exercise was unlikely to happen before the 14th general election. -FMT