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Categories
| Value of NSTP is in its properties |
| Features | |||
| Written by Loong Tse Min | |||
| Monday, 10 August 2009 00:00 | |||
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At its current price of about RM1.75, NSTP is trading at 61.3% below its latest tangible book value per share of RM4.52 reported in its latest first quarter ended March 31. At a market price of less than half its tangible book value, “you could buy the company at below RM2 (per share) and strip out the assets for quite a profit,” says an analyst at a bank-backed brokerage. However, NSTP may be worth much more than even this current high tangible book value. Its freehold land worth RM57.8 million in its FY2008 ended Dec 31 accounts is stated at historical cost. Its landbank includes 101,180 sq m in Bukit Jelutong, Shah Alam, Selangor, with eight-year-old buildings; 6,900 sq m in Jalan Liku, Kuala Lumpur, with 17-year-old buildings; and its headquarters which sits on 7,820 sq m in Jalan Riong, off Jalan Bangsar, Kuala Lumpur, with buildings that go back 36 years. The jewel in NSTP’s land portfolio, at least in the Kuala Lumpur area, would be its Jalan Riong and Jalan Liku (a road that connects to Jalan Riong in Bangsar) properties. They have not been revalued since they were acquired in 1972 and 1988 respectively. The land and buildings, stated as being worth RM22.4 million and RM34.4 million respectively, would easily be valued at a much higher price than that. The company’s investment properties, stated at about RM30.8 million as at March 31, 2009, are also held at cost, but is charged accumulated depreciation and accumulated impairment losses. These investment properties that comprise land and office buildings not occupied by the company could also be undervalued. These properties are held for long-term rental income, capital appreciation or both, according to notes to its accounts. Though not identified as investment properties by the company, it holds a 22-year-old, five-storey shop office on 1,859 sq m in Jalan Bangsar Utama 1 in Kuala Lumpur and 11-year-old retail shoplots and a retail kiosk on 439 sq m and 36 sq m in South City Plaza in Seri Kembangan, Selangor. Besides these two properties, the group lists five other leasehold properties including buildings. These five leasehold properties are regional printing plants on 62,560 sq m in Senai, Johor (11 years old); 58,436 sq m in Kawasan Perindustrian Ajil, Hulu Terengganu, Terengganu (eight years old); 8,100 sq m in Kawasan Perusahaan Prai, Seberang Prai, Penang (eight years old); 14,600 sq m in Seberang Prai Tengah (30 years old); and a warehouse on 12,746 sq m in Pelabuhan Klang Utara, Selangor (17 years old). Its accounting policy treats payment made on acquiring a leasehold land as prepaid lease payments as at the balance sheet date. The prepaid lease payments are amortised over the lease term in accordance with the pattern of benefits provided, ranging between 40 and 96 years. This suggests no revaluation as well, with the original cost gradually amortised over the 40 to 96 years. So, while its non-publishing assets may be undervalued, the company’s publishing assets are at present no slouch either. Although its English language daily has weakened in recent decades, NSTP has been posting strong earnings recovery over the past five years, reporting a net profit of RM47.4 million for FY2008 ended Dec 31, which has grown steadily from RM2.13 million in FY2004. Earnings recovery has largely been driven by the success of its Malay language newspapers, especially Harian Metro, the highest circulation paper in the country with 364,000 sold per day as at end-2008. For FY2008, the main contributor to net profit was advertising revenue, which increased by 5% to RM314 million. Ad revenue from the Malay language papers grew by more than 12% y-o-y. Circulation sales also rose by nearly 5%, contributing RM257.6 million towards total revenue. Cash flows from its past two years have also been strong, with cash flow from operating activities at RM102.3 million and RM106.2 million for FY2008 and FY2007 respectively, compared with RM36.6 million, RM63.9 million and RM36.4 million in FY2006, FY2005 and FY2004 respectively. A higher cash flow implies the company has the capability to sustain its business operations. However, the low market valuation has its own logic. It mustn’t be forgotten that the publishing business sits on top of its landbank and the company cannot just sell the land or decide to undertake property development on those plots without finding an alternate centralised location for its news gathering and publishing operations. So, land values, even if attractive, are not easy to realise without destroying the value of its core business. However, judging from NSTP’s performance in the past five years, prior issues of a shrinking readership and a weak publishing business have now certainly eased, with strong circulation numbers for Harian Metro, growing readership for Berita Harian (up 9% to 1.7 million last year) and the New Straits Times claiming a rise of 13% in readership in 2008. Current major shareholders of NSTP are Media Prima Bhd, with a 43.29% stake, and the Employees Provident Fund, with 10.53% equity interest. This article appeared in Corporate page of The Edge Malaysia, Issue 767, Aug 10-16, 2009.
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