This article first appeared in The Edge Malaysia Weekly on August 26, 2019 - September 1, 2019
UTUSAN Melayu (M) Bhd, which publishes the oldest Malay language paper in the country — Utusan Malaysia — is close to a delisting, given that it had yet to submit a regularisation plan to Bursa Malaysia as at last Friday despite having been classified as a Practice Note 17 (PN17) company for more than a year.
The media company’s shares will be suspended from trading on Bursa on Aug 28 and delisted on Aug 30 unless it appeals to the stock exchange on or before Aug 27.
At this point, the chances of the company being delisted by Aug 30 seem fairly high. After all, its board has stated that it has not been able to find a potential investor to help it revive the group, largely due to its huge liabilities.
Earlier, rumours were rife that the company would cease operations but it quickly diffused the situation by issuing a statement that said the publication of Utusan Malaysia and Kosmo! would continue.
On top of that, it announced that the prices of both Utusan and Kosmo! will increase by 50 sen to RM2 and RM1.50 respectively.
According to executive chairman Datuk Abd Aziz Sheikh Fadzir, the higher prices would generate RM2.3 million a month and reduce the company’s current monthly deficit from RM3 million to RM750,000.
“Utusan will definitely need to find a white knight if it wants to survive. I don’t think it will be able to survive if it merely raises the cover prices. Circulation will drop,” comments an industry observer.
Abd Aziz was also reported as saying that the group is looking at viable business models and will not close the door on a merger if there are potential investors.
It is worth noting that one of Utusan’s substantial shareholders is business tycoon Tan Sri Syed Mokhtar Albukhary. He holds 19.72% equity interest in the media company through Nilam Setar (M) Sdn Bhd.
Another substantial shareholder is Abd Aziz himself, a former Kulim-Bandar Baharu member of parliament from Umno. He owns a 30% stake in the company through his investment vehicle Opulence Asia Sdn Bhd.
Umno, meanwhile, has an 18.16% stake in the company.
Syed Mokhtar was in the news in July when a company linked to him — Aurora Mulia Sdn Bhd — surfaced in Media Prima Bhd, and continued to accumulate shares in the latter. Based on the latest filings with Bursa, Aurora Mulia owns 20.5% of Media Prima’s outstanding shares.
Separately, a report by Public Invest Research on Media Prima says its management sees the association between the company and the billionaire as positive as it could potentially create “better synergies and connections”.
That said, could a merger of the print publications of Utusan and Media Prima be on the cards?
Industry observers say a consolidation between Utusan and Media Prima’s Berita Harian — which is under New Straits Times Press (M) Bhd (NSTP) — and between Kosmo! and NSTP’s Metro is a possibility, given the challenging print media landscape.
However, they note that a merger could be problematic, given the difference in the culture of the two companies. And given that both companies are loss-making, they wonder if a merger is a wise move.
“If a merger between the two publications happens, the minority shareholders would definitely be at the losing end,” remarks an industry observer.
Utusan has been in the red since its financial year ended Dec 31, 2012 (FY2012), when it posted a net loss of RM15.75 million. This had increased to RM184.09 million by FY2018.
In its first half ended June 30, 2019, its cumulative net loss was RM12.09 million or 10.77 sen loss per share as revenue plunged 56% year on year to RM52.66 million.
Retained earnings of RM21.42 million on its balance sheet in FY2012 turned to accumulated losses of RM1.21 million in FY2013. As at June 30, accumulated losses had ballooned to RM261.61 million while net borrowings amounted to RM129.48 million.
In its recent quarterly financial announcement, the company said it tried to address its cash-flow constraints by intensifying efforts to dispose of its properties. However, progress was affected by weak market sentiments, restrictions and requirements by the relevant authorities. Thus, the company was not able to resolve its cash-flow issues immediately.
According to its FY2018 annual report, the company has properties with a total carrying value of RM275 million.
At the close of trading last week, Utusan’s share price stood at 5.5 sen, giving it a market capitalisation of about RM6.1 million. It plunged 54.5% over the five trading days, following the announcement on Aug 19 that the company was unable to meet the requirements to uplift its PN17 status.
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