KUALA LUMPUR (Jan 12): Media Chinese International Ltd (MCIL) is in preliminary discussions with a potential investor on the possible disposal of its entire 73% stake in Hong Kong-listed One Media Group Ltd.
In a filing with Bursa Malaysia today, MCIL said the 73% stake represents 292.7 million shares in One Media.
However, as at the date of the announcement, no deliberations have been made by the board and the parties have not agreed on any deal.
"No legally binding agreement for the possible transaction has been entered into between the parties," it said, adding the company will make further announcements if any decisions are made.
It also highlighted that shareholders and potential investors of the company should note that there is no assurance that the transaction will materialise or eventually be consummated.
Therefore, it advised shareholders and potential investors to exercise caution when dealing in the shares of the company.
One Media is primarily involved in the publishing of Chinese language lifestyle magazines and provides digital and outdoor media services in the Greater China region.
According to One Media's interim report, in the first half year ended Sept 30, 2015 (1HFY16), it registered a turnover of HK$68.7 million (-21.6% year-on-year) and contributed about 28.5% of the group's Hong Kong segment or 4.5% to MCIL's total turnover.
In tandem with its tepid revenue trend, One Media reported a loss before tax of HK$1.06 million amid a slowdown in the retail sector caused by weak consumer demand and reduced spending by Mainland tourists.
Based on its last traded price of HK$1.22 before the suspension of its shares yesterday One Media has a market cap of HK$489.1 million and it is trading at 3 times above its book value per share.
In December last year, speculation was rife that China's e-commerce giant Alibaba has initiated talks with Ming Bao, a publication under the MCIL group. The move came after Alibaba's acquisition of the South China Morning Post.
Nevertheless, Alibaba's spokesperson Rico Ngai and MCIL executive director and group chief executive officer Tiong Kiew Chiong both had denied the rumour.
Kenanga Research analyst Cheow Ming Liang said in a report today that should the group decide to dispose of or partially dispose of One Media's shares, the earnings' impact to MCIL was likely to be minimal. Thus, he made no changes to MCIL's FY16/17 earnings forecast for now.
"Outlook remains challenging in view of the cautious advertising spending environment amid rising cost of doing business. While lower newsprint prices could provide some earnings cushion, it may have an adverse impact should (the) ringgit continue to depreciate against (the) US dollar," he said.
Cheow maintained "market perform" on MCIL, and its target price of 61 sen.
In a separate filing, MCIL announced that trading in MCIL shares will resume with effect from 9.00am tomorrow.
Prior to its suspension, MCIL shares were last traded at 63 sen yesterday, for a market capitalisation of RM1.06 billion.
(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)