Monday, October 05, 2009
The Unique Situation Of NSTP & Media Prima
The Edge wrote that Media Prima is likely to make a proposal this week to privatise NSTP. However, there could be disappointment for minority shareholders of NSTP, Media Prima is valuing NSTP at less than current market price. Media Prima has 43.3% of NSTP while EPF has 8.1%. Net assets per share of NSTP stands at RM4.51. I hope Media Prima does not do the silly thing and offer a substandard price because much of NSTP assets are land and buildings in good areas, which can easily be disposed and they alone amount to 71 sen. I can understand how an offer can be below NAV as value may be hard to extract, but certainly not at more than 50% discount.
Another would say that, well its no use having a high NAV as there are no competing buyers, ... and thats the problem with a "politically linked asset" being listed, I think there are buyers, but who would dare to bid??? You could have your license struck off in the future. Would the powers to be be ok if other independent investors were to bid for NSTP? I guess not.
SC needs to step in with some sort of guideline here in that the issues at stake for NSTP are unique, but the SC must also ensure that minority shareholders are not royally screwed by virtue of the unique situation. The Finance Ministry, SC and Bursa must make things clear among themselves and these listed entities if and when they are considered as a "politically linked counter". Investors will then know and be investing with their eyes open.
Just because its political does not mean investors will not get the "value within" as that in itself is a benchmark of good investing. We cannot turn around and say, "oh no, this one cannot have other buyers one...". That being the case, we must then at least ensure that should Media Prima make an offer, that it be fair, maybe not at NAV but certainly not a 50% discount.
Of course if Media Prima manages to get away with this, its share price will move a lot higher. Media Prima is not going offer cash and owing to its high debt levels... a share issuance is likely. A better proposal will be to issue some shares and new warrants to NSTP shareholders. The warrants would add as a kicker because if the offer was paltry, Media Prima shares will rise and in the end NSTP shareholders will still benefit. But that still should not be the correct way.
I have heard that there might be a one for one share issue, considering Media Prima is some 20% below NSTP's share price, it does not look good. Two Media Prima shares for one NSTP would be considered as fair, even though that is still below NSTP's NAV, but is not likely to happen. I would then suggest to do a one for one share issuance/swap and also give NSTP shareholders a 3 for one free warrants (expiry in 5 years) in Media Prima, with the conversion price at RM1.50. That way, I think the corporate finance deadweight on Media Prima will be much less, and NSTP shareholders will get a very good kicker.