This article first appeared in Corporate, The Edge Malaysia Weekly, on August 15 - 21, 2016.

MEDIA Chinese International Ltd (MCIL) may consider a special dividend from the HK$498 million (RM257.86 million) disposal of One Media Group Ltd. “If there is money, of course we can [consider it] … just wait for further details that will be out soon,” says MCIL executive director and CEO Francis Tiong Kiew Chiong.

“There will be an evaluation and an independent financial adviser to make sure that it (the buyback of One Media businesses) is fair and reasonable. The price tag for the buyback will be announced soon; just wait,” he told reporters after the group’s annual general meeting last Friday.

Executive director Patrick Leong Chew Meng added, “We have to fulfil the conditions precedent, a circular to shareholders has to be issued, and we have to convene an EGM. After we go through all the processes, then only will the money will come in and we can talk about a special dividend after that.”

In the past five years, MCIL has paid out special dividends twice — in October 2011 when it paid 0.4 US cents for FY2011/12, and in November 2012, when it paid 13 US cents for FY2012/13.

The media group, in which Sarawak tycoon Tan Sri Tiong Hiew King has a 52.4% stake, declared a total of 1.1 US cents for the financial year ended March 31, 2016, representing a dividend payout ratio of about 70% and a yield of 6% based on its closing share price of 69 sen on March 31.

MCIL is estimated to see a net gain of HK$363 million from the sale of its 73% stake in One Media to Chinese state-owned Qingdao West Coast Holdings International Ltd. Hong Kong-listed One Media is a subsidiary of MCIL that focuses on the Greater China region.

It is worth noting that MCIL will buy back all of One Media’s businesses — except for the Ming Pao Weekly magazine in Hong Kong and its relevant digital business — at a later date.

The price tag for the buyback has yet to be disclosed.

Francis explains that the buyback is needed because Qingdao West Coast, as a Chinese state-owned enterprise, is not allowed to own Taiwanese publications.

“So, the publication in Taiwan has to be taken out. Secondly, they cannot buy Chinese assets with these funds they have. These are the rules and regulations [there]. Anything that we publish in China, we cannot sell to them, so we have to buy back. We have to comply with the rules. ” He explains that the buyer wants the listed company with the business, which is why the corporate exercise is structured as such.

Besides Ming Pao Weekly, One Media publishes Ming Watch magazine in Hong Kong and China, as well as TopGear magazine in Hong Kong and Taiwan.

At home, MCIL controls the top four Chinese-language newspapers: Sin Chew Daily, Nanyang Siang Pau, China Press and Guang Ming Daily.

On Aug 1, MCIL announced that it would sell its entire 73.01% stake in One Media to Qingdao West for HK$498.06 million cash. The proposed disposal is expected to be completed by the fourth quarter.

In an announcement to the local bourse on Aug 1, MCIL said the proposed disposal will enable it to realise its investment in One Media at a premium. It added that it intends to utilise US$32.2 million to pare down debts, while the remaining sum will be used for working capital and investments, including but not limited to the expansion of its digital media business.

MCIL has been beefing up its digital business in recent years. It launched e-copies of Sin Chew Daily in February 2014 and has since achieved a circulation of 100,000 copies. In June 2015, the group launched its Logon app for e-shoppers to make purchases from its growing online merchant base. MCIL also has an online mobile video portal called “Pocketimes” apart from its news websites and apps.

“You have to prepare yourself for the digital age. If we are not prepared to capture the digital revenue when it comes, it will be gone before we know it,” Francis says.

Leong says the group adopted its mobile first strategy two to three years ago. “We cannot afford to stay still. The media industry is going through a transitional time. We have to be ready.”

For the Malaysian business, the digital segment makes up a single-digit percentage of the group’s total revenue. In Hong Kong, it is about 12%, so there is potential for the digital business to grow in Malaysia, Francis says.

“The focus on switching resources in the years to come [into the digital space] is one area we cannot afford to ignore. We are quite positive that the revenue from the digital spectrum will increase.” When it comes to diversifying the income base, the group will evaluate any opportunities that come its way.

“It will have to be media related or something that can leverage what we already have such as our customer base,” Francis says, adding that it wants to leverage its database and reach.

MCIL’s flagship — Sin Chew Daily — now has 1.4 million readers, its highest ever. Combined with the group’s other publications, MCIL reaches about 2.7 million readers today.

Moving forward, Francis says the outlook for the media industry continues to be challenging.

“Have we seen the worst? Have we seen the light at the end of the tunnel? So far, nobody dares to say that the worst is over ... that is something worrying,” he says.

Nevertheless, MCIL’s balance sheet looks strong. As at March 31, 2016, it had net cash of US$82.5 million. For FY2016, turnover dropped 18.6% to US$349 million from US$429 million a year earlier while profit before tax fell to US$37 million from US$48 million.

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