Highlight Catcha Media has big plans for JV

by **Cals** Wed 07 Aug 2013, 14:58

Highlight Catcha Media has big plans for JV
Business & Markets 2013
Written by Janice Melissa Thean of theedgemalaysia.com
Wednesday, 07 August 2013 13:49

DESPITE an uncertain landscape for online businesses, Catcha Media Bhd has attractive prospects and big plans ahead. For one, it is targeting earnings of RM10 million within the first year of a joint venture (JV) with Says.com, owned by Youth Asia Sdn Bhd, to create what it considers to be one of the largest digital advertising businesses in Malaysia.

In mid-July, Catcha Media announced that it had formalised a RM23 million merger with Youth Asia that would see it inject its publishing and digital businesses into the JV. Catcha Media will have a 70% stake in the JV, while Youth Asia will hold the other 30%. The name of the new entity is being kept under wraps for the time being.
“In the media world, it’s all about getting scale,” says Catcha Media co-founder and chief executive Patrick Grove. According to him, Catcha Media has a reach of eight million Malaysians a month, while Says.com has six million. Collectively, the JV will have over 500 clients.

“Coming together as a merged entity will allow us to go for an initial public offering (IPO) [for the digital advertising business],” says Grove, noting that Catcha Media will have to complete the integration of the companies first.

He says the company is already talking to a few strategic overseas partners to invest in the IPO and proceeds from the exercise will be used for regional expansion, another of its targets.
“We are looking to bring it overseas in the next few years where we will focus on Asean markets, that is Thailand, Indonesia, the Philippines,” says Grove, adding that Catcha Media is in the early stages of discussions with several companies for acquisitions.

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Catcha Media has four businesses — publishing, online media, e-commerce and online classifieds. For its financial year ended Dec 31, 2012, only publishing and online classifieds were profitable.

For Catcha Media, the e-commerce business has been registering the most losses. In FY2012, it registered a pre-tax loss of RM11.13 million. Grove expects the business to be profitable by year-end. “By the end of this year, losses in the e-commerce segment will be gone.”

This segment comprises Catcha Media’s Dealmates.com and hauteavenue.com.

“It is the nature of this business that one needs to lose money for about three to four years before breaking even,” says Grove. “Initially, there are a lot of payment and delivery systems, and the TECHNOLOGY [] needed — these are all costs we have to bear. It takes a while to build up customers to cover those costs.”

Dealmates began as a group buying service in 2011, but was converted into a flash sales website in mid-2012. Group buying refers to bulk buying by an intermediary which then offers the products at a discount. Flash sales websites, on the other hand, rely heavily on multimedia platforms to sell goods and services.

Dealmates now sells a wide range of products, from fashion to auto accessories and sports equipment, at a discount. Grove says Dealmates has reached 30,000 orders per month and saw 1.5 million visitors in June.

Hauteavenue, which retails handbags and travel accessories among other things, is a Singapore-based website parked under the Haute Group, which was acquired by Catcha Media over a year ago. Since the acquisition, the company has launched its Malaysian website, which now generates twice the profit of the Singapore business.

“We aim to create the largest e-commerce company in Asean,” says Grove, adding that it is currently in talks with several parties for merger opportunities. “It could be three to four e-commerce companies coming together in one merged entity within the next two to three months,” he adds, noting that plans to grow this segment will help the group’s earnings profile if it becomes profitable soon.

The publishing and online classifieds businesses reported a profit before tax of RM1.6 million and RM14.4 million respectively in FY2012. However, losses from the online media and e-commerce businesses totalled RM11.2 million, resulting in a profit before tax of RM4.88 million for the group.

Catcha Publishing publishes and distributes 14 magazine titles in 17 editions, including JUICE, Kitchen+Bathroom, EVO and Prestige.

The online classifieds segment comprises iCar Asia Ltd, which houses used-car trading websites and was listed on the Australian stock exchange in September 2012. Catcha Media has a 30% stake in iCar Asia.

“iCar Asia is currently our most valuable asset, valued at RM85 million,” Grove says, adding that the segment has two million buyers across Malaysia, Indonesia and Thailand.

The websites are currently No 1 in Malaysia in terms of the volume of listings. “We hope to be No 1 in Thailand and Indonesia by the end of this year,” says Grove.

Possible privatisation

Grove and his team at Catcha Media have been toying with the idea of going private if the company’s share price continues to languish. The company’s shares saw post-election interest in line with the broader market, hitting a high of 71.5 sen on May 20.

“But we still view it as undervalued, that is anything less than RM1,” Grove says, adding that it is not a short-term concern.

CIMB Research, which covers Catcha Media, has a target price of 96 sen for the company, based on a sum-of-parts valuation, which takes into account its 30% stake in iCar Asia.

“But in the long term, if the share price remains undervalued, it is only logical to consider a privatisation at the end of the year. We have no detailed plans yet, just intellectual discussions,” says Grove.

Grove has an indirect stake of 58.5% in Catcha Media as at May 15 via Catcha Group Pte Ltd, the media company’s largest shareholder. It is followed by HSC Healthcare Sdn Bhd, Datuk Justin Leong of GENTING BHD [] and STAR PUBLICATIONS (M) BHD [].

This story first appeared in The Edge weekly edition of July 29 - August 04, 2013.