MEDIA PRIMA BHD
(Nov 13, RM1.74)
Hold at RM1.70: ECM Libra Investment Research has maintained its hold call on Media Prima Bhd with a target price of RM1.69, and said there is potential for an increase in its target price, mainly due to recent developments.

It said if Media Prima managed to purchase all outstanding shares in The News Straits Times Press (M) Bhd (NSTP), the number of shares issued in Media Prima would increase to 1.009 billion (without the warrants conversion).

“Taking into account the increase in earnings contribution from NSTP and the enlarged share capital, there will be a potential increase of our price target to RM1.75, 3.6% higher than our current target price of RM1.69, should the offer be accepted,” it said.

ECM Libra said on the assumption that NSTP managed to maintain its previous year’s performance, Media Prima could expect an additional contribution of about RM25.5 million to its bottom line, which would bring its forecast adjusted net profit for the financial year ending Dec 31, 2010 (FY10) to RM113.1 million, and its FY10 forecast earnings per share (EPS) to 11.2 sen based on enlarged number of shares.

Media Prima also planned to distribute all special dividend it gets from NSTP (RM37.6 million) to its existing shareholders, which would result in a special dividend payout of 4.4 sen per share.

The group had revised its offer for the remaining ordinary shares of RM1 each in NSTP to RM2.40 to be satisfied by the issuance of six ordinary shares of RM1 each in Media Prima at an issue price of RM2 each for every five offer shares accepted and one new warrant for Media Prima for free for every five offer shares accepted.

Each warrant carries the entitlement to subscribe one new Media Prima shares at an exercise price of RM1.80 each. “Considering that the new target price would be below the exercise price of the warrants of RM1.80, we do not expect the warrants to be exercised at this point,” it said. — ECM Libra Research, Nov 13