This article first appeared in The Edge Financial Daily on July 5, 2019

Media Prima Bhd
(July 4, 48.5 sen)
Maintain reduce with an unchanged target price of 34 sen: Quoting sources, theedgemarkets.com in a July 3 report disclosed that Umno had sold an 11.1% stake in Media Prima Bhd, held in proxy by Gabungan Kesturi Sdn Bhd. The buyer is Tan Sri Syed Mokhtar Albukhary, who is Forbes Malaysia’s 12th richest person, and a known associate of Prime Minister Tun Dr Mahathir Mohamad. The Malaysian Reserve, a business newspaper owned by Syed Mokhtar, reported on July 4 that the purchase was made by Aurora Mulia Sdn Bhd.

Based on Bloomberg data, an off-market transaction of a similarly sized block occurred at 5.14pm on July 2. The Media Prima shares were valued at RM73.8 million or 60 sen apiece, which was at a 17.7% discount to its audited financial year 2018 (FY18) book value pershare of 72.9 sen. The transacted price was at a 23.7% premium to the stock’s closing price of 48.5 sen on that day.

We do not think Syed Mokhtar’s purchase of the 11.1% stake in Media Prima would trigger a mandatory general offer (MGO). Even if he mops up the remaining 7.96% stake in Media Prima that Umno owns through Altima Inc, that would not be enough to trigger the 33-50% creeping threshold for an MGO. We would be negative on Media Prima’s prospects if Syed Mokhtar would indeed consolidate his unprofitable media assets with Media Prima, as The Straits Times reported on July 3.

The Straits Times implied that Syed Mokhtar is the true beneficiary of the 12.8% stake in Media Prima held by Mitsubishi UFJ Financial Group. If that was the case, Syed Mokhtar would own in all a 31.9% stake in Media Prima — assuming he is: i) the beneficiary of the shares held by Mitsubishi UFJ; and ii) planning to buy the shares held by Altima. Interestingly, Mitsubishi UFJ has not bought Media Prima shares since April 10, when it used to do so on a nearly weekly basis.

Without an MGO angle, we see no reprieve for Media Prima’s share price in the short-to-medium term. Its high concentration in traditional media leaves it vulnerable to a continuing decline in revenue. — CGSCIMB Research, July 4