IN an effort to counter its financial problems of the past, Sistem Televisyen Malaysia Bhd (TV3) recently requested the approval of its shareholders for a debt-restructuring plan. The green light was given.
For many shareholders, they are perhaps still cautious over TV3's poor track record. Irritation has probably hardened into anger, what with TV3's protracted weak financial history. Nevertheless, ever since Abdul Rahman Ahmad and Shahril Ridza Ridzuan took over the reins of MRCB's revamp, growth prospects have been somewhat less grim.
Therefore, the question is will TV3 be able to turnaround in terms of profitability and is there hope for shareholders of TV3?
Yes, says an analyst from a local research house. TV3 is actually already profitable, it is only because of poor financial management in the past that it is currently debt-laden.
Another analyst from a local research house is confident that TV3's restructuring will bear fruits.
Not only will it clean up the balance sheet, but shareholders will also have a stake in NSTP and TV3, he says.
The restructuring of the MRCB group of companies will see the creation of the country's first listed print-broadcast entity, Media Prima Bhd, which will control both The New Straits Times Press (M) Bhd (NSTP) and TV3.
TV3 should therefore return to the black after the first year of its merger. The analyst is projecting Media Prima to make around RM40 million net profit after its first year, or 7.3 sen earnings per share.
A TV3 spokesperson says he is optimistic that TV3 would be back in the black by end financial year ending Aug 31, 2003.
For its first quarter ended Nov 30, 2002, TV3 registered a turnover of RM65.09 million compared to RM64.89 million in the same period of the previous year. Net loss, however, increased to RM1.62 million from RM1.36 million.
Revenue is coming in, just bear in mind that the turnaround won't happen overnight, says the analyst.
The TV3 scheme will pretty much reduce the company's debt level from RM645 million currently to between RM250 million and RM300 million. It should also lift the company out of the much dreaded Practice Note 4 category by June this year. TV3 will save about RM30 million in interest payments annually with the completion of the exercise.
The debt restructuring exercise will address the current TV3 debts, which is now at an unsustainable level. The exercise will also result in a healthy balance sheet for TV3. These two factors would contribute to the regularisation of TV3's financial position.
TV3's spokesperson reveals that TV3 already has a hold of 52 per cent of market share from its previous 46 per cent.
The move to hive off media companies from parent MRCB will largely free TV3 of debts and allow the operationally profitable company to start anew.
The source within TV3 says that prospects for Media Prima is very positive. Not only is it well placed to be the provider of integrated media services for consumers, but also the presence of TV3 and NSTP provide an excellent platform for the growth of Media Prima as a one-stop centre for advertisers as well as consumers.
The TV3 scheme is made up of a debt-to-equity conversion. Shareholders take a capital reduction of 60 per cent and debts are refinanced through the issue of shares, bonds and loan stocks.
Under the scheme, a holder of 10,000 TV3 shares ends up with 1,840 MRCB shares and 1,200 Media Prima shares. Media Prima, in turn, will hold a 100 per cent stake in TV3 and a 43.5 per cent stake in NSTP.
Media Prima, which will take over the listing status of TV3, will be the leading convergence group and have the highest combined revenue among media owners.
Media Prima will de-merge from MRCB to allow the two companies to focus on their respective core activities: one emerging as an integrated media or multimedia group and the other at liberty to concentrate on construction, engineering, infrastructure, energy and property ventures.
As at Aug 31 2002, TV3 group had net current liabilities of RM588.6 million and a deficit shareholders' fund of RM356.9 million.
Media Prima has projected a net profit of RM216.6 million for its financial year ending Aug 31, 2003. This is based on the assumption that the MRCB group's restructuring is completed by June. A research note is valuing Media Prima at RM1.14 at the market's 1.6 times price to book.
Currently, TV3 and NSTP are planning to work together to tap the potential synergistic value that will result from its restructuring plan.
The prospects of both NSTP and TV3 sharing editorial content, business contracts, infrastructure and marketing resources to increase revenue is moving, but does not exactly tickle the fancy of analysts.
Theoretically, the union of TV3 and NSTP is seen as a synergy, but in reality, it would take time for the synergy to have real impact, says the analyst from the local research.
This makes sense as the joint remunerations a newspaper and broadcasting entity can reap is only that much. The luxury of sharing information and perhaps packaging advertisements at cheaper rates are benefiting, but certainly not major. Whether or not the synergy will have a big impact on the bottom line is hard to tell. After all, it is two very separate businesses.
The TV3 source however has this to say: TV3 and NSTP having 19 and 155+ years of experience could share editorial content, business contacts, infrastructure and marketing resources to increase their revenue.
Post restructuring, both companies can offer marketing packages for clients at competitive rates, for example, going to the clients or advertisers directly with its value added propositions besides influencing their media planning or brand positioning,
A positive point for TV3 would be the recent survey by AC Nielsen. It showed that TV3 still reigned supreme among terrestrial stations. The survey showed that TV3 had recorded an all time-high by chalking up 51 per cent share of total viewership.
TV3's current close competitor is TV2 with a 20 per cent market share, while TV1 registered a 16 per cent share.
ntv7, despite having the impression of the happening station, only managed to capture a 15 per cent share.
TV3's branding system which was introduced last September has obviously paid off. Currently, it has more highly rated programmes compared to the other stations, says the analyst.
The company's products, for example, are sold to the Middle-East and Asian countries, while airtime sale is targeted to Malaysian-based advertisers.
Earlier this week, shares of TV3 rose as much as 13 per cent, making it them the second biggest gainer on the Kuala Lumpur Stock Exchange. This happened after it was reported that it was in talks to sell its unprofitable Ghana operations. The report said TV3 was negotiating with Rupert Murdoch, chairman and chief executive officer of News Corp, and an unidentified party from Ghana. On Thursday, the stock closed at 30 sen.