Asia Media plunges 33% on diversification proposal

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KUALA LUMPUR (June 15): Both Asia Media Group Bhd’s share and warrants plunged 33.33% in the morning market trade following the company’s corporate exercise on par value reduction, share consolidation and rights issue of shares with warrants to raise fund for its diversification into the oil palm industry.
 
On resumption of the noon trade, as at 2.36pm, Asia Media (fundamental: 0.6; valuation:0.9)’s share was down 1.5 sen at 3 sen – it had earlier dropped as much as 2 sen or 44.44% to 2.5 sen, after some 49.4 million shares changed hands. 
 
The digital advertising company’s warrants was down 0.5 sen or 33.33% at 1 sen.
 
A remisier said the heavy sell down on the counter was due to its proposal to diversify into oil palm plantation, a new venture totally unrelated to its current business.
 
“Investors invested in the shares because they like the business the company is doing, but the company suddenly decided to change to plantation and proposed a par value reduction - the investors are not happy with it,” said Goh Kay Chong, senior remisier at SJ Securities Sdn Bhd.
 
Last Thursday, the company had announced the proposed par value reduction to 2 sen from 10 sen, together with the roposed share consolidation of every five ordinary shares of 2 sen each into one new ordinary share of 10 sen each.
 
It  also proposed a renounceable rights issue of up to 979.76 million new shares on the basis of three rights shares for every one existing share held, together with up to 326.59 free detachable warrants on the basis of one warrant for every three rights shares subscribed, at an entitlement date to be determined later.
 
Goh said the investors did not react to the proposal immediately on Friday because they needed time to digest the news.
 
Asked if he expects the share to continue to be on a downward trend this week, Goh said the market will have to re-evaluate the outlook of the company and decide.
 
(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.)