Asia Media Group Bhd
(Oct 9, RM58 sen)

Maintain sell with a target price of 65.3 sen (before adjustment for bonus and warrant issues): Last Friday, Asia Media Group Bhd proposed:

(i) a bonus issue on the basis of one bonus share for every one existing Asia Media share; and
(ii) free warrants on the basis of one warrant for every one existing Asia Media share. The proposals are expected to be completed by fourth quarter (4Q) of this year.

Upon completion of the proposed bonus issue and assuming all free warrants are exercised (indicative exercise price 51.1 sen against 87 sen), the group’s share capital will increase by 200% to 752.4 million shares from 250.8 million currently.

We have also adjusted our net profit to increase by 5.8% to RM34.7 million for financial year 2013 (FY13) after taking into account the interest income accrued (interest rate of 2%) assuming all warrants are exercised at the indicative price of 51.1 sen.

The additional shares from the bonus issue will boost trading liquidity of the group and prepare for its eventual target to transfer to the Main Market.

The two digital terrestrial television broadcasting (DTTB) towers (USJ and Berjaya Times Square) have been rolled out. However, the company will only begin commissioning once the other three DTTB towers (Bukit Lanjang, Bukit Besi and Puchong) have been rolled out. The group is still expecting the simultaneous commissioning to be on schedule, targeted by year-end.

Following this, we are expecting ad rates to increase by 25% which we have already imputed in our earnings forecasts.

Despite the positive outlook, we are still concerned about certain risks, such as declining corporate advertising expenditure, delays in the DTTB rollout in the second half of this year and limitation to providing digital out of home (DOOH) to RapidKL buses only.

We make no change to our target price of 65.3 sen (before bonus and warrants issue) based on FY13 earnings per share of 13.1 sen pegged to a price-earnings ratio of five times. However, on a fully diluted basis, the adjusted target price is 23 sen, which implies capital downside of 52.3% from the ex-price of 44 sen. Maintain “sell”. — TA Securities, Oct 8


This article first appeared in The Edge Financial Daily, on Oct 10, 2012.