Ancom eyes media business listing next year

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AGRICULTURAL chemicals producer Ancom Bhd is eyeing the listing of its media business as early as next year, say sources. What could be included in the listing are the media properties under Ancom’s wholly-owned subsidiary Redberry Sdn Bhd and the privately held The Malay Mail Group. A Thai media group may also be a partner in the listing exercise, the sources add.

“The potential foreign partner is keen but things are still at the discussion stage. While the talks continue, Ancom’s target is to list its media business on the local bourse next year,” says a source familiar with the matter. “There are also plans to inject The Malay Mail Group into the listing vehicle.”

Ancom owns and operates various media platforms that include outdoor billboards, indoor advertisements in airports and advertisements on buses and digital screens and in hypermarkets. It is focused on the Klang Valley.

On top of that, Ancom operates and manages advertisements for a major cinema chain in the country, operates an outsourced customer contact centre and organises international and local motorsport events.

The Malay Mail Group, or its operating entity Malay Mail Sdn Bhd, is currently not part of Ancom. Its connection to the group is through Ancom’s group managing director Datuk Siew Kah Wei and non-executive, non-independent director Tan Sri Al Amin Abdul Majid.  Both have a stake in Malay Mail Sdn Bhd through their respective 50% equity interest in Dahlia Megah Sdn Bhd, which in turn has a 46.79% stake in Malay Mail Sdn Bhd.

Publisher of English daily The Malay Mail, Malay Mail Sdn Bhd saw its net loss double to RM10.8 million in the financial year ended Dec 31, 2013 (FY2013), from RM5.5 million a year earlier. But company sources say it is on track to turn around and should be back in the black this financial year.

Interestingly, Ancom’s media segment returned to profitability in the financial year ended May 31, 2014 (FY2014), with a segmental profit of RM1.3 million compared with a segmental loss of RM25.4 million in FY2013.

“The performance of the division [media segment] was primarily driven by successful in-charge of key advertising contracts throughout FY2014. Revenue across all our media platforms performed better in FY2014,” states Ancom in its 2014 annual report.

The media segment posted a higher revenue of RM107.4 million in FY2014 compared with RM80.9 million in FY2013, translating into a 32.7% increase.

Ancom’s FY2013 results were dragged down by higher impairment losses in its media segment. As shown in Redberry’s accounts, the company had incurred impairment losses of RM21.26 million in FY2013, compared with RM8 million a year earlier.

Ancom’s annual report also states that in FY2014, Redberry incurred impairment of RM10 million on intangible assets and receivables  that were mainly related to past acquisitions of media rights.

In its latest 1QFY2015 results ended Aug 31, 2014, Redberry registered a segment profit of RM1 million versus a segment loss of RM1.1 million in 1QFY2014.

Most of Redberry’s revenue and profit came from outdoor advertising through wholly-owned subsidiary Redberry Outdoor Sdn Bhd and 75%-owned Meru Utama Sdn Bhd.

In FY2014, Redberry Outdoor registered a pre-tax profit of RM300,000 compared with a loss before tax of RM500,000 the year before. Meanwhile, Meru Utama, which owns exclusive rights to advertising mediums in the Kuala Lumpur International Airport and Klia2, saw its pre-tax profit double, notes KLIA’s annual report. In FY2013, Meru Utama registered a profit of RM5.68 million, which was slightly lower than the RM5.87 million earnings received a year earlier.

According to PricewaterhouseCoopers’ (PwC) Global Entertainment and Media Outlook 2014-2018 study, out-of-home advertising revenue in Malaysia rose to US$78 million in 2013, up 48% from US$53 million in 2009. The professional service firm forecasts out-of-home advertising to have a compound annual growth rate of 8.6%, leading to revenue of US$118 million in 2018.

“Malaysia began to adopt digital outdoor screens in 2010, while in 2012, there was a new proposal to require restaurants, bars and clubs in Kuala Lumpur to have WiFi, which is expected to lead to opportunities for more digital campaigns within these premises,” notes the study.

PwC also adds that digital out-of-home advertising revenue will rise to US$51 million in 2018 from US$12 million in 2013, accounting for 43% of total revenue at the end of the forecast period.

“Digital is a big thing now in media … and the group’s current business model has taken that into account. Moving forward, the media business will incorporate more digital ventures and projects, but given the business sensitivity of the discussions, we cannot reveal our plans until the time is right. Digital is the way to go,” says an Ancom source.

Digital revenue from advertising had risen to 25% in 2013 from 14% of total advertising revenue in 2009, notes PwC. It expects digital revenue from advertising to hit 33% by 2018.

Ancom posted a net profit of RM24.6 million in FY2014 compared to a net loss of RM12.5 million in FY2013, despite revenue declining to RM1.86 billion from RM2.03 billion in the same period. The improved performance was attributed to an improvement in its gross margin to 11.3% from 9.6% a year earlier. There was also a one-off gain of RM20.1 million from the sale of its logistics subsidiary, Sinsenmoh Transportation Pte Ltd.

The stock has been trending upwards since mid-November. It closed at 49 sen last Tuesday — up 12.2% from 43 sen on Oct 16 — giving the company a market capitalisation of RM102.7 million. From a 52-week low of 34.5 sen on Jan 3, 2014, Ancom’s share price touched a 52-week high of 70.5 sen on July 21.

This article first appeared in The Edge Malaysia Weekly, on November 24 - 30, 2014.