This article first appeared in The Edge Malaysia Weekly on July 23, 2018 - July 29, 2018

WHILE many are wondering whether Umno will lose its grip on Media Prima Bhd, not many may be aware that its single largest shareholder is a financial institution — Mitsubishi UFJ Financial Group.

Filings with Bursa Malaysia show that Mitsubishi UFJ has, slowly but steadily, accumulated a 12.626% stake over the past one year or so in the media group, which has a presence in the print media, radio and free-to-air TV. The share acquisitions were done through Morgan Stanley & Co LCC.

However, it is not known if Mitsubishi UFJ is the ultimate shareholder or is holding the shares on behalf of a client.

Mitsubishi UFJ first became a substantial shareholder in Media Prima in early April last year. By Nov 20 last year, its shareholding had crossed 10%.However, there has not been any publicly known request for board representation in the media group.

Some quarters note that the Japanese financial group could be mopping up Media Prma shares as a strategy to average down its investment cost, given that the share price has fallen substantially.

Over a one-year period, the counter has shed 40.7%, from 91 sen on July 19, 2017, to 54 sen last Wednesday.

It hit a 52-week low of 28 sen on May 15 shortly after the general election. However, it has since doubled to 57.6 sen last Thursday. Still, the stock is trading below its net tangible asset of 67.15 sen.

Besides Mitsubishi UFJ, another shareholder that has piqued curiosity is Gabungan Kesturi Sdn Bhd, which holds an 11.09% stake held via KAF Trustee Bhd.

Gabungan Kesturi has long been known as an investment arm of Umno, but that may not necessarily be the case. According to filings with the Companies Commission of Malaysia and Media Prima’s latest annual report, Gabungan Kesturi is listed as a wholly-owned unit of Amanah Raya Bhd, which in turn is 100% owned by Minister of Finance Inc.

“Amanah Raya could just be acting as a trustee for Gabungan Kesturi’s stake in Umno. But if Amanah Raya is indeed the ultimate shareholder of Gabungan Kesturi, it would mean that stake would be under the government because Amanah Raya is wholly owned by MoF,” an analyst muses.

Simply put, this may mean that the stake held by Gabungan Kesturi belongs to the Malaysian government and not Umno.

That said, Umno holds a direct 7.96% stake in the media company through Altima Inc. The Employees Provident Fund is the second largest shareholder with 11.99%.

Attractive land bank

Media Prima operates four free-to-air television stations under Media Prima Television Networks, print publications, several radio stations, out-of-home advertising and digital media.

However, what many see as gems within the company are the land parcels it owns. Based on its 2017 annual report, it owns 56 acres, which have a total net book value of RM215.71 million. The land parcels were revalued in 2017.

Among the 10 properties listed in the report is its land occupied by the New Straits Times Press (M) Bhd headquarters in Bangsar and Jalan Liku. That property has the highest value of RM315.74 psf, or a total net book value RM47.93 million.

The group also has a large tract, where its regional printing plant is, in Bukit Jelutong Industrial Park, Shah Alam, which is valued at RM315.74 psf, or a total of RM93.97 million.

The company’s net debt as at March 31, 2018, was low at RM46 million, equivalent to a net gearing of barely 6.1%.

However, it incurred losses in the past two consecutive years due to shrinking revenue. It posted a net loss of RM70 million for its financial year ended Dec 31, 2016 (FY2016), which deepened to RM670 million in FY2017 as a result of impairments and downsizing of its workforce that year.

Excluding that, the loss after tax would have been RM172.3 million.

On March 31, 2018, Media Prima reported another disappointing set of earnings, which came in below analyst expectations. Revenue grew to RM280.67 million, up 3.1% from RM272.2 million a year ago. It recorded a net loss of RM21.83 million, which was less than the RM38.47 million net loss it suffered the previous year.

“It was the television segment that kept the group in the red as its revenue declined 15.2% year on year. The nature of the segment’s high operating leverage resulted in its 1Q2018 loss after tax, widening 51% y-o-y to RM34.7 million. This cancelled out the other segments’ aggregate profit after tax of RM11.7 million in 1Q2018,” CGS CIMB Research says in a May 25 results note.

While its traditional media business continues to be a drag, some see potential in its newer initiatives to strengthen its revenue from commerce and non-advertising sources and generate income from its digital initiatives.

Revenue from Media Prima’s commerce segment totalled RM46.71 million for 1QFY2018, with home shopping contributing the bulk of it at RM44.07 million, which is almost double the RM27.73 million it made from a year ago.

It is still in net loss position of RM1.61 million as at 1QFY2018, which is however, significantly less than the net loss of RM4.16 million previously.

In 1QFY2018, its content creation division recorded an increase in net profit of more than four times to RM6.27 million from RM1.36 million a year ago, despite a slight decline in revenue from RM26.37 million in 1QFY2017 to RM24.75 million in 1QFY2018.

What remains to be seen now is whether Media Prima’s new strategy will be successful. If it is, Mitsubishi UFJ would have made a good investment on the stock.

There are currently three “buy”, six “hold” and six “sell” calls on the counter.

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