A Portrait in Mixed Media

Issue cover-dated 26th July 2001

Malaysian newspapers have recently been at the heart of political squabbles--which are in turn tied up with big business deals and a potential shakeout in the industry

By Lorien Holland

Malaysian newspapers have been making the headlines themselves recently. In May, the Chinese-language Nanyang Siang Pau got temperatures rising when the main Chinese political party bought a majority stake in Nanyang Press Holdings. Now, industry sources are saying that a controlling stake in the English-language New Straits Times Press may be sold to Telekom Malaysia. Both counters are worth watching for future movement, but analysts advise caution.

"We tend to shy away from media stocks," says Edmund Cheah, executive director of KL Mutual Funds, one of Malaysia's largest privately owned unit trusts. "The fundamentals of a company are difficult enough to read, and with politics involved, it is even harder."

Nonetheless, other analysts say that both deals could eventually bolster the bottom line of the newspapers concerned. For Nanyang, which already boasts an average return of 14.2% over the past five years, the sale could lead to closer affiliation with the English-language The Star--Star Publications is also controlled by the Malaysian Chinese Association, or MCA.

For the New Straits Times Press, new management could refocus the group's publications and help stem losses on circulation and advertising revenue. In fact, NSTP has seen its share price rise by 22% in the past week on expectations of the sale. Its shares are currently at around 3.40 ringgit ($0.89). But there remain significant political uncertainties ahead.

In Nanyang's case, the May 31 purchase met such strong resistance in the Chinese community that the MCA that bought it has offered to sell its entire stake. As negotiations with potential buyers have not made much progress, the MCA's investment arm will still have to make a mandatory general offer to all minority shareholders before the end of July, because it bought more than one-third of the company. That prospect has kept the share price stable at around 5.20 ringgit.

As for NSTP, its sale has yet to get the seal of approval from the Ministry of Finance, and Telekom Malaysia denies that negotiations are currently under way. In addition, NSTP will need to find a buyer for its stake in financial-services company Commerce Asset Holding, or CAHB, in order to reduce its heavy debts. Interest payments on those debts currently run at around 80 million ringgit ($21 million) a year, and recently pushed even the operational profit of NSTP into the red.

To add to short-term uncertainties, both publications are facing industry-wide difficulties: high newsprint costs and falling advertisement revenues as a result of the economic downturn. "Industry-wide, the situation is not improving, but the upside could be six months down the line if there is an economic recovery in the fourth quarter," says Jeffrey Tan, media analyst for KAF-Seagroatt Research in Kuala Lumpur.

If that upside does emerge, then NSTP could see its situation improved, as a potential buyer for its CAHB stake is rumoured to be on the horizon, according to research papers from Merrill Lynch. However, the sale of CAHB itself will not be enough to turn the group around, and even the prospect of a new management team under Telekom Malaysia failed to excite analysts polled by the REVIEW, who said the New Straits Times must first overcome a perception that it is too closely linked with the government. Its share price is also seen by some as expensive compared with that of the market leader, Star Publications.