NSTP & Media Prima, Not That Fair To NSTP But What Can you Do

Business Times: Media group Media Prima Bhd (MPB) today made an offer to take over New Straits Times Press (M) Bhd (NSTP) through a 1:1 share swap to create largest integrated media group in the country. The share swap offer, at an issue price of RM2 each, also comes with one free MPB new warrant for every five NSTP offer shares accepted.

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Hmmm... think i should get a share of advisory fees ... http://malaysiafinance.blogspot.com/2009/10/unique-situation-of-nstp-media-prima.html

Comments in my 5th October posting:
Of course if Media Prima manages to get away with this, its share price will move a lot higher. Media Prima is not going offer cash and owing to its high debt levels... a share issuance is likely. A better proposal will be to issue some shares and new warrants to NSTP shareholders. The warrants would add as a kicker because if the offer was paltry, Media Prima shares will rise and in the end NSTP shareholders will still benefit. But that still should not be the correct way. I have heard that there might be a one for one share issue, considering Media Prima is some 20% below NSTP's share price, it does not look good. Two Media Prima shares for one NSTP would be considered as fair, even though that is still below NSTP's NAV, but is not likely to happen. I would then suggest to do a one for one share issuance/swap and also give NSTP shareholders a 3 for one free warrants (expiry in 5 years) in Media Prima, with the conversion price at RM1.50. That way, I think the corporate finance deadweight on Media Prima will be much less, and NSTP shareholders will get a very good kicker.

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Anyways, 2 free warrants for every 10 shares is good I guess. I think that Media Prima shares would rocket as this deal favours them no end. I think RM2.00 is no problem for Media Prima. The warrants if it has an exercise price of RM1.80 would trade around 40 sen at a minimum. Not much upside left for NSTP but tons of it for Media Prima.


p/s photos: Aum Patcharapa Chaichua

The Unique Situation Of NSTP & Media Prima

The Edge wrote that Media Prima is likely to make a proposal this week to privatise NSTP. However, there could be disappointment for minority shareholders of NSTP, Media Prima is valuing NSTP at less than current market price. Media Prima has 43.3% of NSTP while EPF has 8.1%. Net assets per share of NSTP stands at RM4.51. I hope Media Prima does not do the silly thing and offer a substandard price because much of NSTP assets are land and buildings in good areas, which can easily be disposed and they alone amount to 71 sen. I can understand how an offer can be below NAV as value may be hard to extract, but certainly not at more than 50% discount.

Another would say that, well its no use having a high NAV as there are no competing buyers, ... and thats the problem with a "politically linked asset" being listed, I think there are buyers, but who would dare to bid??? You could have your license struck off in the future. Would the powers to be be ok if other independent investors were to bid for NSTP? I guess not.

SC needs to step in with some sort of guideline here in that the issues at stake for NSTP are unique, but the SC must also ensure that minority shareholders are not royally screwed by virtue of the unique situation. The Finance Ministry, SC and Bursa must make things clear among themselves and these listed entities if and when they are considered as a "politically linked counter". Investors will then know and be investing with their eyes open.

Just because its political does not mean investors will not get the "value within" as that in itself is a benchmark of good investing. We cannot turn around and say, "oh no, this one cannot have other buyers one...". That being the case, we must then at least ensure that should Media Prima make an offer, that it be fair, maybe not at NAV but certainly not a 50% discount.

Of course if Media Prima manages to get away with this, its share price will move a lot higher. Media Prima is not going offer cash and owing to its high debt levels... a share issuance is likely. A better proposal will be to issue some shares and new warrants to NSTP shareholders. The warrants would add as a kicker because if the offer was paltry, Media Prima shares will rise and in the end NSTP shareholders will still benefit. But that still should not be the correct way.

I have heard that there might be a one for one share issue, considering Media Prima is some 20% below NSTP's share price, it does not look good. Two Media Prima shares for one NSTP would be considered as fair, even though that is still below NSTP's NAV, but is not likely to happen. I would then suggest to do a one for one share issuance/swap and also give NSTP shareholders a 3 for one free warrants (expiry in 5 years) in Media Prima, with the conversion price at RM1.50. That way, I think the corporate finance deadweight on Media Prima will be much less, and NSTP shareholders will get a very good kicker.

NSTP In The News (Business Times Singapore)

Business Times Singapore chose to highlight some critics on the pending NSTP corporate restructuring. I think the fact that the share price has been so far away from its NTA really showed that nobody wants to hold the stock as it is. What is more important is that the minority shareholders are not mistreated in any major corporate restructuring.

KUALA LUMPUR, Sept 25 — Criticism in cyberspace is mounting against a plan to privatise the country's most established publishing company, the New Straits Times Press (NSTP).

The plan, which was presented to NSTP's board a month ago, proposes that free-to-air television station Media Prima completely take over NSTP through a share swap. In the process, NSTP will be delisted from the stock exchange.

Media Prima is NSTP's single largest shareholder with a 43.3 per cent interest. The other large shareholders include the Employees Provident Fund (EPF) and another state agency which together hold around 13 per cent.

The sticking point could be Media Prima's ownership. Its single largest shareholder is private company Gabungan Kasturi, which is owned by business nominees of Umno, the dominant political party in the ruling Barisan Nasional. As a result, top editors of the paper have always been appointees of the prime minister of the day.

Writing in his blog on Wednesday, Datuk A. Kadir Jasin, a former editor-in-chief of NSTP who still has strong Umno links, called the plan a “plot” to use “the goodwill and stronger financial position of NSTP to shore up” Media Prima.

Kadir argued that the publisher's brand name “must never be allowed to be destroyed or undermined”.

Blogger Ahiruddin Atan, the editor of the Malay Mail tabloid, wrote yesterday that the move could provoke a political backlash against Prime Minister Datuk Seri Najib Razak. He said that the plan “would provide his detractors with the firepower to accuse Najib Razak of trying to put the media under his direct control”.

For all the criticism, however, the deal is likely to go through as Najib is said to be amenable to the idea. More to the point, the main minority shareholders — the EPF and the other state agency — have endorsed the plan. The only remaining hurdle remains consent from Umno's powerful political bureau which will meet some time this week to consider the plan.

Analysts generally agree that the deal favours Media Prima as the underlying value of the newspaper group is more than twice the value of its debt-heavy controlling shareholder. Even so, NSTP has not been performing: its share price (RM2.15 yesterday) has been below its net asset value (RM4.52) for the longest time.

The deal would also transform Media Prima, which owns all of the country's free-to-air television stations, into Malaysia's most powerful media company and allow it unhindered access to all of NSTP's earnings.

The newspaper group has relatively low debt but has increasingly seen its fortunes flagging. Once the premier English-language daily, its flagship publication the New Straits Times has seen its circulation plummet amid declining advertising revenues. The NST's circulation is just under 120,000 now from its peak of 280,000 in the 1980s.

Indeed, NSTP's earnings are now largely driven by its Malay publications, Berita Harian and Harian Metro, a racy tabloid with the highest audited circulation in the country. The group reported a net profit of RM47.4 million for the year to Dec 31, 2008.

Media Prime, meanwhile, reported a net profit of RM86 million for the same period. — Business Times Singapore

p/s photo: Maggie Cheung

Why I Like NSTP (Seriously... A Lot ...)

Granted, NSTP is not a great company. This is more a value proposition in taking it private. Of course such a proposition will only remain as such unless there are ready catalysts that will make it "happen sooner" than indefinitely. I have good reasons to see corporate restructuring / privatisation for NSTP in the very near future. The gobbling up of shares over the last 4 weeks also gave me a lot of confidence in the stock as a strong value play.

The boring industry data factors such as 1) the consumption of lower priced newsprint, 2) a pick-up in ad spend, 3) cover price hike taking effect, and 4) full impact from ad rate increase .... are all mundane and blah-blah. If NSTP is privatised, shareholders are unlikely to accept an offer at current prices as the group’s assets are worth RM4.51 per share... in fact a privatisation would have to be at least RM4.20 for it to be considered as worthwhile. And let me tell you that it is worth paying RM4.20 for NSTP.

The best reason for privatising is this, the value of its land holdings and buildings alone is worth RM310m. Taking that out the underlying print business is being valued at less than 2x PER. Why do you want to keep a business listed at just 2x PER valuation? If you can somehow revitalise the business or investor confidence or need huge capital raising, then by all means wait for the markets to revalue the stock - but nothing of that sort will be happening. While the print business is second rate, it is still a viable business and certainly not at just 2x PER.

The stock had a run in early July with the revival of market talks on the merger with Utusan, which had previously been in the news back in 2006. In recent weeks there have rife rumours on the potential privatisation of NSTP by its major shareholder, Media Prima via the acquisition of the remainder 56.7% stake that it does not currently own in NSTP. On Aug 11 a financial daily reported that NSTP’s board is considering the offer from Media Prima, which involves a straight 1-for-1 share swap. Based on the last closing price of Media Prima of RM1.56, the offer stands the risk of being rejected as it would significantly undervalue NSTP given its NTA of RM4.51/share as at 2Q09. EPF and KWAP collectively hold 13% in NSTP, and are likely to have an influence over the outcome of any proposal, and would probably demand some form of cash component.

The timing is very ripe with the departure of the previous CEO from Media Prima. Datuk Amrin Awaluddin who was appointed as the group managing director of Media Prima Bhd (MPB) effective Sept 1, has joined the board of NSTP as a non-independent non-executive director as well. Amrin was previously the chief operating officer of MPB and has also assumed the position of chief financial officer of Sistem Televisyen Malaysia Bhd. The main strategic thinking behind this is that it is no longer viable or even attractive to let NSTP be listed alone. Media as an industry is a lot more than just being a newspaper or a tv operator, you need to have a collaborative media unit in all facets of the industry. You need to cross sell and leverage on the multimedia concept.

Should Media Prima acquire the remainder stake at NSTP at current market values via a share swap (which would likely be the case given the former’s high debt position), the deal would enable NSTP shareholders to participate in the longer term growth potential offered by the more liquid and enlarged Media Prima entity. The deal would:
- Unlock value through the sale of NSTP’s valuable non-core assets.
- Media Prima would be able to tap into NSTP’s strong balance sheet and cashflows for investments in additional media platforms. The Utusan deal would probably not go through as the political and cultural hurdles may be too hard to overcome, especially when you have Media Prima with the highly attractive free to air stations. You do not want incompatible content.

Just 217m shares, Media Prima has 43.3% and EPF has 10.5%, and I doubt they will be selling , in fact they should be accumulating ahead of a positive restructuring.... and Maybank Investment Research has ceased coverage on NST since May 2009, and thats always a good sign. No, that's not a slight on Maybank Investment Research but rather the act in itself confirms that institutional investors could not care less on NSTP as a listed vehicle - confirmation that something has to be done and quick.

52 week high-low 1.94 - 0.975 ... Although I am not an out and out technical analysis guy, I do subscribe to volume and breakouts. Plus I love it when the breakouts are accompanied and substantiated with a strong fundamental or corporate catalyst play. That is a strong indication that the timing is about just right. It broke through its 52 week high strongly today with volume, I like that very much. As a pure buy I would be prepared to buy up to RM2.45 just to hold till restructuring, which should see the shares closer to RM4.00 by then.