Asia Media explains private placement move

KUALA LUMPUR: Asia Media Group Bhd, the country's largest transit-TV network operator, wants to undertake a strategic placement to conform to certain licence requirements set by the Malaysian Communications and Multimedia Commission (MCMC), its controlling shareholder Datuk Ricky Wong Shee Kai said.

Wong, who owns more than 45 per cent of the listed entity, told Business Times recently that the primary aim of the proposed private placement is to ensure that Asia Media has the 30 per cent Bumiputera shareholding requirement, which is a must if the company is to comply with the MCMC guidelines.

Currently its 100 per cent unit Asia Media Sdn Bhd has three sets of licence from the MCMC. They are network facility provider licence, which allows it to set up infrastructure, the network service providers licence to offer commercial services and the content applications service provider (CASP) licence to offer broadcasting services.

Asked what will happen if the placement is approved by the requlators and taken up by investors but subsequently dumped into the open market, thus bringing down the Bumiputra shareholding in it, Wong said that the company is talking with the authorities on how best to overcome such a situation.

He declined to reveal more on the matter, but did admit that Asia Media has taken some flak from the investment community for coming out with the proposed placement so soon after its listing on the fledgling ACE Market.

"The bulk of the money will be used for working capital. The company's gearing is almost nothing, it would no be a major problem for us to raise money via bonds or bank borrowings," said Wong.

He added that the placement is being proposed at this point solely to comply with the MCMC requirements.

Information from Bursa Malaysia shows that more than 80 per cent of the capital raised from the placement exercise will be used for working capital purposes over a 24-month period, while some 15 per cent will be utilised for capital expenditure pruposes over a 12-month period.

Asia Media is proposing a private placement of 79.8 million new shares specifically to Bumiputera investors.

If all the shares are taken up, Bumiputera shareholders will control some 34 per cent of the enlarged company. Bumiputra investors currently control some 10.93 per cent.

Still, the proposal is not a walk in the park for Asia Media, as the main promoters for the Asia Media initial public offering may still have to top up their shares in the open market to ensure that when the paid-up is enlarged, they still have 45 per cent of the enlarged spread.

Nevertheless, CIMB Research is optimistic that any dilution effect from the private placement will be overshadowed by Asia Media's future earnings growth.

"Though the placement exercise may not be well received given its dilutive impact and its post-IPO timing, investors will not be worse off as the placement price is roughly in line with the IPO price and is a discount to the current share price.

"The group's strong growth prospects in the next two to three years will also compensate for this," analyst Sharizan Rosely wrote in a report.

CIMB Research valued the stock as much as 53 sen a share and expects it to post a net profit of RM15.5 million in the current financial year.