INDUSTRY observers are wondering what net benefits and proceeds will accrue to Media Chinese International Ltd (MCIL) after it completes its latest corporate exercise, which will see it first dispose of its Hong Kong-listed One Media Group Ltd.
There is a HK$498.06 million price tag on the deal with MCIL estimating that it will make a net gain of HK$363.3 million from the sale of its 73.01% stake in One Media to Chinese state-owned company Qingdao West Coast. MCIL will also save HK$11.45 million on interest when some of the cash proceeds are used to pay off part of the group’s borrowings.
However, the completion of the proposed disposal hinges on several conditions, including MCIL buying back all of One Media’s businesses except the Ming Pao Weekly magazine in Hong Kong and its relevant digital business at a later date. The price of the buyback was not disclosed in the Aug 1 Bursa Malaysia announcement.
One Media boasts five titles in its stable: the Ming Watch magazine in Hong Kong and China and the TopGear magazine in Hong Kong and Taiwan, apart from Ming Pao Weekly.
It is understood that the parties are still discussing the details of the buyback.
“They are still in discussion ... but they will have to finalise the details soon as they will have to submit the circular to Bursa in about two months,” a person familiar with the matter tells The Edge.
Details of the buyback of One Media’s businesses are crucial to determine the net effects and benefits of the whole exercise, say analysts.
“What this means is that the HK$363 million estimated net gain and HK$498 million made by MCIL from this proposed disposal might be less, or more in the best-case scenario, should it acquire back the businesses from One Media ... not many people realise this,” says a media analyst at a local bank covering the stock.
In an Aug 2 note to clients, Maybank Investment Bank Research says due to the lack of details on the connected disposal (CP) agreement, it is unable to quantify yet the net sales proceeds attributable to MCIL.
“We suspect that the businesses that will be acquired back are loss-making. Therefore, our previous estimate of a 4% to 5% earnings per share accretion in the financial years ending March 31, 2017 to 2019 (FY2017-FY2019) from the disposal of One Media may not materialise. Overall, we are still positive on the development but not overly excited,” it adds.
Maybank IB Research is maintaining its estimates for now, recommending a “hold” on MCIL and a 73 sen target price.
Barring unforeseen circumstances, MCIL expects the proposed disposal to be completed by the fourth quarter of the year.
MCIL is a leading Chinese-language media group with a product portfolio in Southeast Asia, Greater China and North America comprising dailies. On the home front, the group publishes the top four Chinese language newspapers, namely Sin Chew Daily, China Press, Guan Ming Daily and Nanyang Siang Pau.
MCIL is listed on both Bursa and the Hong Kong stock exchange.
In an Aug 1 filing with Bursa, MCIL says the proposed disposal will enable it to realise its investment in One Media at a premium.
It adds that it intends to utilise HK$250 million to pare down debts and the remaining sum for working capital and investments, including but not limited to the expansion of its digital media business.
MCIL’s shares closed at a 52-week high of 76 sen last Monday following a five-day suspension prior to the announcement of the proposed disposal. They had hit a 52-week low of 47.1 sen on Aug 26 last year. Week on week, MCIL closed 0.68% lower at 73 sen last Friday, giving the company a market capitalisation of RM1.23 billion.
MCIL had a net cash position of RM100 million as at March 31. Its net profit dropped 15.2% year on year to RM103.98 million in FY2016 while revenue fell 18.6% to RM1.36 billion. The media company blamed the poorer results on a weaker ringgit and Canadian dollar against the US dollar during the year under review, which resulted in higher newsprint prices.
One Media saw its net loss widen to HK$15.6 million in FY2016 from HK$11.1 million in FY2015 while revenue declined to HK$137.2 million from HK$179.2 million.
In its FY2016 annual report, MCIL notes that total gross advertising spending in Hong Kong fell 2.2% during the year under review, citing the research data of admanGo.
“Digital media is getting more popular among advertisers and the Hong Kong market’s online advertising expenditure for 2015/2016 reported a growth of 14.4% on the mobile and interactive platforms. On the other hand, advertising expenditure for paid newspapers decreased by 0.3% and spending on magazines dropped 18.4%,” it states.
Recognising the challenging operating landscape for traditional media, MCIL is changing its business model by diversifying its income base and actively venturing into the digital media space. The group’s e-papers in Malaysia have been on an upward trajectory and based on its data, Sin Chew Daily had achieved a record 88,313 e-copies as at March 31, within just two years of being launched in February 2014.
At its AGM last year, MCIL told its shareholders that it was actively exploring new investment opportunities, including e-retail, education, property development and big data marketing.
Save by subscribing to us for your print and/or digital copy.
P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.