Friday 29 Mar 2024
By
main news image

MEDIA industry talk has it that at least two media groups — Media Chinese International Ltd (MCIL) and Redberry Media Group — are looking to unlock the value of their land and diversify into property development.

When asked whether MCIL (fundamental: 2.40; valuation: 1.80) is indeed taking that business path, management, in a written reply, says, “In view of the fast-changing media landscape, both locally and overseas, it has long been MCIL’s strategy to seek diversification opportunities.

“In order to grow its non-traditional revenue stream further while consolidating its market share in print media, MCIL will spare no effort to improve profitability and operational efficiency through diversification, including [venturing into] property development, if possible.”

On whether the group is in talks with other parties to develop part of its land parcels, including that in Jalan Riong, Bangsar, Kuala Lumpur, management says, “... provided good business opportunities present themselves ... but MCIL is not at liberty to disclose any specific locations at the moment.”

MCIL’s 42,716 sq ft freehold tract in Bangsar is in a prime location, just next to the office of Media Prima Bhd’s New Straits Times Press. It is no secret that Media Prima (fundamental: 1.95; valuation: 1.40) is exploring the possibility of redeveloping the low-rise office building into a high-rise block called Media Prima Tower.

“Should MCIL and Media Prima combine and package their parcels in Jalan Riong, the potential value for both parties would be higher than if they sell them separately,” says an industry source.

The net book value of MCIL’s land and buildings stood at US$64.5 million (RM240.9 million) as at March 31, 2015, down from US$74.5 million a year earlier, mainly due to currency conversion difference and annual depreciation charges, management says.

“These properties will continue to be used by MCIL in its newspaper publishing and printing operations worldwide,” it adds.

Meanwhile, sources tell The Edge that Ancom Bhd — the parent company of Redberry Media Group — is also considering developing a 1.31ha tract in Section 13, Petaling Jaya, where its media business is located.

The leasehold land, which is owned by Ancom (fundamental: 0.55; valuation: 1.20), had a net book value of RM28.8 million as at May 31, 2014. As it is housing low-rise office and factory buildings, its yield is low.

Coming up just behind the tract is the centreSTAGE project — an integrated development comprising shoplexes, designer and serviced suites and a hotel.

“The group is exploring a few schemes to unlock the value of the land, and one of them is to work with a property developer. For centreSTAGE, the initial price was about RM400 psf. Today, the price of new projects in the vicinity is more than RM600 psf,” says a source familiar with the matter.

“Now, it is about timing as well as deciding on the right route to take.”

A sales agent with another nearby project known as PJ Midtown says its serviced apartments are priced at RM860 psf and scheduled for completion in 2018.

The development, undertaken by IOI Properties Group Bhd and Sime Darby Brunsfield, is a stone’s throw from centreSTAGE and a five-minute drive from the Ancom tract. PJ Midtown will feature serviced apartments, offices and shophouses.

It is worth noting that Star Media Group Bhd (fundamental: 2.50; valuation: 1.40) had taken such a path in 2011 when it sold a six-acre parcel that previously housed the group’s office in Section 13, Petaling Jaya, to JAKS Island Circle Sdn Bhd. As part of the deal, Star Media Group will also get a 13-storey office building with a built-up of 270,000 sq ft, to be called Star Tower.

Analysts say it makes sense for media players to look at unlocking the value of their land. “Some of the parcels they are sitting on are in prime locations. They should consider monetising them. After all, from a media operation standpoint, the industry is facing an uphill battle, and this is reflected in the decline in earnings,” says an analyst with a bank.

MCIL, which publishes the top four Chinese newspapers in the country, saw its revenue and net profit drop 8.4% and 36.9% year on year to US$429.1 million and US$31.1 million respectively in the financial year ended March 31, 2015. The decrease in earnings was attributed to the recognition of an impairment loss of goodwill and an allowance for impairment loss of interest in an associate, totalling over US$7 million.

Analysts say the decline was cushioned by lower newsprint costs and savings from the group’s ongoing stringent cost management.

Apart from Malaysia, MCIL has printing and publishing businesses in Hong Kong, China and North America.

AmResearch, in a May 29 report on MCIL, says it expects earnings to remain flat in the coming quarters in view of a challenging economic outlook, particularly in Malaysia, which implemented the Goods and Services Tax in April.

It adds that on a positive note, MCIL’s lean operating structure and cost-saving initiatives are beginning to show results.


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. Visit www.theedgemarkets.com for more details on a company’s financial dashboard.

This article first appeared in The Edge Malaysia Weekly, on June 15 - 21, 2015.

 

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.

      Print
      Text Size
      Share