Thailand-listed VGI eyes Redberry Group

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THAILAND-LISTED VGI Global Media PCL recently carried out due diligence on Redberry Media Group to explore the possible acquisition of a stake in the Malaysia-based out-of-home advertising outfit, sources say. Redberry is part of Bursa Malaysia-listed, agricultural chemicals producer Ancom Bhd (fundamental: 0.55; valuation: 1.2).

“VGI is exploring the acquisition of a less than 30% stake in Redberry. The transaction would see a fresh capital infusion into Redberry, which will help the company expand its media advertising platform,” says a source familiar with the matter.

“Redberry has plans to form a new company to venture into transit advertising … this means advertising in travel and transport infrastructure, from bus and train stations to the MRT and even taxis,” the source adds.

Interestingly, VGI holds the exclusive rights to manage advertising space in the core network of Bangkok’s BTS SkyTrain. The rights will expire in 2029 and VGI has the first right to extend the contract. According to the company’s 2013/14 annual report, it has the rights to manage 23 stations on the core network and all BTS trains, which run through the key commercial, residential and office areas of central Bangkok.

Key players in the Thai transit media market are divided according to transport type — BTS SkyTrain advertising is exclusively operated by VGI, bus advertising mainly comes under Plan B Media and MRT underground advertising is mainly operated by Bangkok Metro Networks.

As at March 31, 2014, VGI’s media network consisted of 5,400 screens and 14,800 panels of advertising space across Thailand.

“We will continue to assess further opportunities for inorganic growth to supplement our core business growth where such opportunities can deliver long-term incremental returns to shareholder value. Our goal is clear — to reinforce our position as the number one player in the Thai out-of-home market and to selectively expand our network across the Asean market,” VGI chairman Keeree Kanjanapas says in the group’s annual report.

Rebrand and restructure

Ancom’s media business, which comes under Redberry, isn’t exactly the most profitable business in the group, but it returned to the black in its financial year ended May 31, 2014.

The media business posted a segmental profit of RM1.3 million in FY2014 compared with a segmental loss of RM25.4 million in FY2013. Even so, the division saw a segmental loss of RM413,000 for the quarter ended Nov 30, 2014, compared with a loss of RM928,000 in the previous corresponding period.

Media analysts say much still needs to be done. “It is a one to two-year story if it can execute its business plan well as there is a lag between audience share and advertising expenditure. It requires some time. This segment that it is in — the out-of-home advertising business — is very competitive. To be in this business, it needs to deal with government bodies, such as MBPJ (Majlis Bandaraya Petaling Jaya) and DBKL (Dewan Bandaraya Kuala Lumpur),” says a media analyst with a bank-backed research house.

Redberry underwent a couple of internal restructuring and changes over the years. The latest was the appointment of Datuk Wong Sai Wan as chief operating officer of the group.

Wong, a media veteran, joined Redberry in 2013 as special projects director. Prior to that, he was with Star Media Group for nearly three decades.

It is understood that Wong, together with his team, has been tasked with rebranding the group to become an advertising platform giant as well as expanding the group’s digital strategy.

“The restructuring will also take into consideration VGI’s investment should it come in,” says a source.

The bulk of Ancom’s media business is in out-of-home advertising. For FY2014, Redberry Outdoors Sdn Bhd registered a profit before tax of RM300,000 compared with a loss before tax of RM500,000 the year before.

Meanwhile, Ancom’s 75%-owned Meru Utama Sdn Bhd — the sole concessionaire of indoor advertising space in Kuala Lumpur International Airport, klia2, [email protected] and Senai International Airport — saw its profit before tax double, according to Ancom’s annual report. For FY2013, Meru Utama registered a profit of RM5.68 million, slightly lower than the RM5.87 million it reported a year earlier.

The Edge wrote last month that Redberry was in informal talks to sell Meru Utama to local media groups, one of which was Star Publications (M) Bhd. The price that Redberry is asking for is in the RM100 million range. It is understood that no decision or agreement has been made on the sale yet.

According to Meru Utama’s website, it has been a strategic business partner of Malaysia Airports Holdings Bhd in promoting and developing advertising in airports for the past 29 years.

Should the sale of Meru Utama materialise, the potential listing that Ancon had planned for its media arm this year would likely be delayed, sources tell The Edge.

Apart from the advertising business in airports, Ancom owns and operates various media platforms, including outdoor billboards as well as advertisements on buses, in hypermarkets and on digital screens with a focus on the Klang Valley.

It also has the rights to operate and manage advertisements for a major cinema chain in the country and operates an outsourced customer contact centre as well as holds the rights to organise international and local motor sport events.

Ancom group managing director Datuk Siew Kah Wei and non-executive non-independent director Tan Sri Al Amin Abdul Majid have a stake in Malay Mail Sdn Bhd — the company that prints The Malay Mail newspaper — through their respective 50% stake in Dahlia Megah Sdn Bhd, which in turn has a 46.79% stake in Malay Mail Sdn Bhd. Wong is the editor-in-chief of The Malay Mail.

There is also the website www.themalaymailonline.com. Although, on paper, there are no common shareholders in the printed newspaper and the website, the online portal is located in the same office as Malay Mail Sdn Bhd and Redberry.


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 March 9 - 15, 2015.