This article first appeared in The Edge Financial Daily on July 17, 2019

Media Prima Bhd
(July 16, 48.5 sen)
Upgrade to hold and a higher target price (TP) of 48 sen: Aurora Mulia Sdn Bhd (unlisted), a company linked to billionaire Tan Sri Syed Mokhtar Albukhary, bought another 4.96% of Media Prima Bhd’s equity via an off-market transaction on July 11. Again, the value of the direct business transaction was set at 60 sen/share. This put the sum of the 55 million Media Prima shares sold on July 11 at RM33 million.

Syed Mokhtar is now officially Media Prima’s largest shareholder. This was Aurora Mulia’s second purchase of Media Prima shares. The first, occurring on July 2, was for a block of 123 million shares held by Gabungan Kesturi Sdn Bhd (unlisted), a trust company for the opposition Umno. Aurora Mulia’s stake in Media Prima now rises to 16.05% — making it the single largest shareholder. Following this latest development, we took the opportunity to review the Takeover Code to see whether a mandatory general offer (MGO) can be triggered. The seller of the July 11 off-market transaction was Cimsec Nominees (Tempatan) Sdn Bhd — and not Altima Inc (unlisted), another Umno trustee. Syed Mokhtar’s stake in Media Prima could eventually amount to 36.8% if: i) he is indeed the beneficiary of the 12.8% stake held by Mitsubishi UFJ Financial Group Inc, as media reports suggest; and ii) he buys the 7.96% stake held by Altima. In that case, Syed Mokhtar would breach the 33%-50% creeping threshold to trigger an MGO.

The second possibility of Syed Mokhtar triggering an MGO would be if he asks for control of the board and makes strategic corporate changes. He would then be deemed to have taken control of the company, which would lead to an MGO, unless he applies for an exemption from Securities Commission Malaysia. However, we are unsure when this can take place or if Syed Mokhtar plans to emerge as a controlling shareholder.

We reduce our price-to-book value (P/BV) discount to Media Prima’s financial year ending 2020 forecast (FY20F) P/BV from 50% to 30% to derive a new TP of 48 sen. The tough times faced by Media Prima’s existing legacy business notwithstanding, a potential MGO should give the stock a rerating boost. The TP is also at a 20% discount to the 60 sen per share paid by Aurora Mulia for the shares. The downside risk is Syed Mokhtar being granted a waiver from undertaking a MGO. — CGSCIMB Research, July 15