This article first appeared in The Edge Malaysia Weekly on July 8, 2019 - July 14, 2019

CONTENT sharing between Malaysia’s oldest Malay daily Utusan Malaysia and English newspaper The Malaysian Reserve is expected to commence soon, a source familiar with the two media companies tells The Edge.

Utusan Melayu (M) Bhd’s printing plants are currently churning out copies of The Malaysian Reserve daily, others familiar with the two firms add.

While the two publications are more or less at opposite ends of the spectrum, they have one thing in common — tycoon Tan Sri Syed Mokhtar Albukhary. He has a 14.8% stake in the publicly traded Utusan and is believed to wholly own TMR Media Sdn Bhd, the publisher of The Malaysian Reserve.

And now, with his latest acquisition — an 11.09% stake in Media Prima Bhd from Umno-linked Gabungan Kesturi Sdn Bhd — the low-profile businessman has now extended his reach onto the Malaysian media scene.

Adding to the mix is information that Syed Mokhtar is behind a 12.8% stake in Media Prima that is held by Mitsubishi UFJ Financial Group. Two sources contacted by The Edge affirm the fact, although it was yet to be confirmed at press time.

However, if the 12.8% stake is being held for Syed Mokhtar, it suggests that his move into Media Prima had been in the works for some time now, given that Mitsubishi UFJ, which surfaced as a shareholder in the media company in April 2017, has been accumulating shares over the last two years.

If this is true, it would mean that Syed Mokhtar is effectively the largest shareholder in Media Prima with what could be a 23.9% stake if the Mitsubishi UFJ block and his newly acquired stake from Gabungan Kesturi are combined.

While details of Syed Mokhtar’s plans are scarce, industry observers suggest his purchase in Media Prima has opened up opportunities for the tycoon to inject his existing media assets into the company, in exchange for shares, in order to gain control of it.

This has been Syed Mokhtar’s modus operandi over the years. For instance, he edged out the late Tan Sri S M Nasimuddin S M Amin of the Naza group in a bidding war for DRB-Hicom Bhd in December 2004. He bid RM3.60 a share for a 15.8% stake in DRB-Hicom, 10 sen more than Nasimuddin’s offer for the block that was controlled by the family of the late Tan Sri Yahya Ahmad. After securing the 15.8% block, Syed Mokhtar tightened his grip on the company by injecting his 70% stake in Bank Muamalat Bhd into it in a deal valued at RM1.01 billion, and satisfied in shares.

Other than Bank Muamalat, another company that handled the operations and maintenance work for the Tanjung Bin power plant in Johor was also injected into DRB-Hicom in a deal valued at RM720 million. To put things in perspective, Tanjung Bin is controlled by Malakoff Corp Bhd, which, in turn, is a Syed Mokhtar company (see chart).

As a result, Syed Mokhtar’s stake in DRB-Hicom rose from 15.8% to more than 50%, giving him control over the company.

Other than asset injections, the businessman is also known for related-party transactions (RPTs). Another of his flagship companies — Tradewinds (M) Bhd — came to control the country’s sole rice distributor, Padiberas Nasional Bhd (Bernas), in 2009 after acquiring Hong Kong-based Wang Tak Co Ltd’s 31.5% stake in it for RM2.08 a share. Wang Tak is linked to IGB Group Bhd.

Subsequently, Tradewinds bought out private company Gandingan Bersepadu Sdn Bhd’s 22.2% stake in Bernas and triggered a general offer.

Gandingan Bersepadu was a private company controlled by the tycoon himself.

In MMC Corp Bhd, one of his core companies, Syed Mokhtar acquired a 19.9% stake from government-linked investment company Permodalan Nasional Bhd in 2000.

Then in 2002, MMC acquired 50% of the Port of Tanjung Pelepas from Syed Mokhtar’s private company Seaport Terminal (Johore) Sdn Bhd for RM1.6 billion, satisfied by RM750 million in cash and 285.3 million new MMC shares at RM3 apiece, which increased Seaport Terminal (Johore)’s stake in MMC to 44.9%.

“It will not be surprising if he injects assets into Media Prima for shares,” says a market observer.

But what can he inject into Media Prima?

Syed Mokthar’s media and media-related assets

At the outset, it has to be said that it is difficult to chart Syed Mokhtar’s actual assets because of his effective use of proxies.

He is understood to be the ultimate shareholder of TMR Media. As mentioned earlier, he also holds 14.8% of Utusan through Nilam Setar Sdn Bhd, which is almost wholly owned by Datuk Seri Ismail Yusof.

Ismail is a member of the board of trustees and the executive vice-chairman of Syed Mokhtar’s Albukhary Foundation.

Besides the print media, Syed Mokhtar’s other media assets include the concession for the infrastructure of Malaysia’s digital TV transmission (MYTV Broadcasting Sdn Bhd), MPH Bookstores and Percetakan Nasional Malaysia Bhd (PNMB).

PNMB handles the printing of government documents, such as the economic and budget reports, and federal and state laws, enactments and gazettes, and until a few years ago, it was wholly owned by the Ministry of Finance with the Federal Land Commissioner holding a single share.

News reports have it that Syed Mokhtar led the bidding war for PNMB.

Company searches show that MYTV Broadcasting and PNMB have a common shareholder — Sutera Bakti Sdn Bhd — which is owned by Ahmad Zaed Saleh Hamdi (70%) and Ahmad Zaki Hawari (30%), who are believed to be connected to the tycoon.

Meanwhile, MPH Bookstores’ ultimate shareholder is Bukhary Equity Sdn Bhd. It is worth noting that Sutera Bakti and Bukhary Equity share the same registered address — 110, Jalan Maarof, Bangsar Baru, Kuala Lumpur.

Media Prima, whose assets span print, television, radio, out-of-home advertising, content and digital media, seems to be a good fit for Syed Mokhtar’s media assets. It would be interesting to see if he injects the assets for cash instead of shares, given the challenging landscape of the media industry.

However, it is noteworthy that other than PNMB, all of Syed Mokhtar’s media assets are in the red.

The latest available data shows that TMR Media has been loss-making for three consecutive years. In its financial year ended Dec 31, 2017, its losses amounted to RM4.41 million. Utusan, meanwhile, is a PN17 company.

The tycoon’s television outfit MYTV Broadcasting is running at heavy losses as well while MPH Bookstores is bleeding red ink. In its financial year ended Dec 31, 2018, MYTV Broadcasting’s accumulated net losses amounted to RM28.15 million while MPH Bookstores’ net loss stood at RM5.17 million in its financial year ended March 31, 2018.

PNMB is the only company that saw an increase in net profit in its latest financial results available, up 87.24% year on year to RM36.22 million in its financial year ended Dec 31, 2018.

Therefore, it would be understandable if analysts viewed such asset injections negatively. CGS CIMB Research says in a recent report that it sees the potential injection of the tycoon’s loss-making companies as a negative for Media Prima that could lead to a stock derating.

As it is, Media Prima is barely staying afloat. The company registered a net profit of RM58.62 million in its financial year ended Dec 31, 2018 (FY2018), after two years of losses. The net profit was largely a result of gains on property sales — that of a piece of land and three properties in Bangsar and Shah Alam.

Excluding these gains and the reversal of impairment on Malaysian Newsprint Industries Sdn Bhd, Media Prima’s FY2018 core net loss amounted to RM106.4 million, according to a report by CGS CIMB Research on Feb 28.

As at March 31, 2019, Media Prima’s cash and bank balances stood at RM234.92 million while its borrowings amounted to RM3.69 million. Its net asset value per share worked out to 66.63 sen.

What could likely happen after the assets are injected into Media Prima is a consolidation, say sources. Under Media Prima’s The New Straits Times Press (M) Bhd (NSTP) sit the Malay dailies Berita Harian and Harian Metro. Sources see the consolidation of Utusan and BH as well as Utusan’s Kosmo and BH’s Harian Metro as a possibility, given that the print media has been faltering.

In its first quarter ended March 31, 2019, Utusan’s net loss widened to RM8.05 million from RM5.85 million a year ago. The net loss of Media Prima’s publishing segment widened as well, to RM21.9 million from RM2.19 million a year ago.

It is worth mentioning that it would not be a walk in the park for the two Malay papers, given their different work cultures and directions.

As for MYTV Broadcasting, market observers do not see any synergy arising from its injection into Media Prima, which operates four free-to-air (FTA) channels, namely TV3, ntv7, 8TV and TV9. This is because it is a concession holder of digital terrestrial broadcast television infrastructure.

Currently, the FTA broadcasters use an analogue format for transmission, although a switch-off has been proposed for the third quarter of the year. It is doubtful that the switch-off will happen as it has been postponed several times.

“MYTV is not a content provider and it cannot be one as it is explicitly stated in the concession agreement that content providers cannot be infrastructure owners,” says an analyst.

“It is supposed to make revenue from charging the FTA broadcasters for riding its infrastructure. Eventually, when the FTA channel providers move from the current analogue format to digital, they will have to ride MYTV’s infrastructure.

“This means in terms of revenue, if MYTV is injected into Media Prima, it will merely be an inter-company transaction. The way I see it, if the injection of MYTV into Media Prima takes place, it would be a way for Syed Mokhtar to gain access to fresh funds.”

But will a lack of synergy alone be enough to prevent another RPT?

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