NSTP (RM2.40) Privatization: Revised Offer

• Better swap ratio of 1.2 Media share for every 1 NSTP share.
• NSTP dividend of 40 sen to be paid on 7th Dec 2009.
• 1 free Media Prima's warrant for every 5 offer shares accepted.

Therefore, NSTP shares should be valued at:

RM2.40 + 40 sen dividend + 10 sen implied dividend = RM2.90

Disclaimer: The above article does not represent an investment advisory service as no subscription or management fees are charged. The contents of the article are provided as general information only and should not be taken as investment advice or as a recommendation to buy or sell any security or financial instrument. Any investment decisions carried out based on information, analysis, or commentary provided above is solely your responsibility. You should consult your investment adviser before making any investment decisions.

Media Prima (RM1.70) to raise offer for NSTP (RM2.00); NSTP declares special dividend of 40c per share tax exempt, payment date Dec 12

Media Prima Bhd is expected to revise upwards its offer for The New Straits Times Press (Malaysia) Bhd (NSTP) shares it does not own by improving the swap ratio. Sources said Media Prima would offer at least 1.1 Media Prima shares for every one NSTP share, marginally above its previous one-for-one offer.

“They are upping the offer from its original one Media Prima share for every NSTP share. The improved offer of 1.1 Media Prima shares for every one NSTP share will value NSTP at RM2.20 per share compared with RM2 previously. The revised offer could even go up to 1.2 Media Prima shares for every one NSTP share. Regardless, the offer will be upped to at least RM2.20 per NSTP share,” said a source.

“This is to help the acceptance rate for the offer. Institutional shareholders are believed to be okay with the previous offer but the retail investors were not that pleased.” Apart from a direct swap of shares, Media Prima in its proposal to privatise NSTP is also offering one Media Prima warrant for every five NSTP shares held.

It is learnt that there is not likely to be any change to the offer on the warrants. In a further move to appease minority shareholders, sources said NSTP could also declare a special dividend. If that happens, a big chunk of the money will go back to Media Prima, which is the major shareholder of NSTP.

Yesterday, both Media Prima and NSTP requested for a two-day suspension in the trading of their respective stocks pending an announcement. “The request for suspension is in view that the company will be making an announcement on the revision of the terms and conditions of the proposed offer,” noted Media Prima.

Media Prima’s proposed privatisation of NSTP is not well received by the minorities of the latter as it is less than half its book value and at 18.7% discount to its last traded price of RM2.46. Even so, some have argued that NSTP’s shares had been trading below RM2 for a long time and had only started moving up lately because of the takeover rumours. NSTP’s average one-year trading price is RM1.35. This means, at RM2, the price is at a 48% premium to its one-year average price. NSTP closed at RM2 on Tuesday, before its suspension, while Media Prima closed at RM1.70.

Another update:

The New Straits Times Press (M) Bhd (NSTP) declared special dividend of 40 sen per share tax exempt. "The board has declared a special dividend on the basis that the company has a substantial amount of retained earnings which can be rewarded to shareholders," said NSTP on Thursday, Nov 12 the entitlement date. The payment date is Dec 12.Shares of NSTP is suspended and will resume trading on Friday, Nov 13.

Source: The Edge

Commentary:

Have been having quite an experience with this NSTP counter. Anyway, quite 'snake' (in Cantonese means sly) lor in this whole dealing. To recap, investors were banking on NSTP's NAV of RM4.53 to gauge at what price Media Prima (Media) will be privatizing and Media came up with a meager valuation of just RM2.10 (including 1 Media warrant for 5 NSTP shares) via 1 for 1 share swap at an issue price of RM2.00 (Media Prima's share price at that time was only at about RM1.70).

This was a huge 54% discount to its NAV and 15% discount to its closing price before announcement of RM2.46. After the announcement, the price plunged till about RM2.00 currently. The management's reasons for valuing NSTP at this price was because it's been trading below RM2 all this while before any talk of privatization and it cannot take into account its high NAV arising from its valuable properties in Bangsar as they are operating assets (Well, if I'm the owner, I could just move my operations to other cheaper places like Shah Alam and sell my properties in Bangsar or make it into a property company, which will give me higher returns as Bangsar's land is so valuable. How can I not take this into account? Maybe someone could explain this to me.)

Nonetheless, this is a good turnaround for the disgruntled minority shareholders of NSTP. There are talks of swap ratio of 1.1x or 1.2x, thus valuing NSTP shares at RM2.20 or RM2.40. In addition, another 40 sen dividend will be paid on 7th Dec 2009, making the deal even sweeter. I expect NSTP share price to shoot up again on this piece of news. Anyway, just food for thought, if I'm the shareholder and I'm calling the shots in all these deals, I'll sure have a hefty gain from all these turnaround events.

*Rough estimation for NSTP share price: 40 sen dividend + RM2.20 issue price at swap ratio of 1.1x + 10 sen implied warrant = RM2.70

Disclaimer: The above article does not represent an investment advisory service as no subscription or management fees are charged. The contents of the article are provided as general information only and should not be taken as investment advice or as a recommendation to buy or sell any security or financial instrument. Any investment decisions carried out based on information, analysis, or commentary provided above is solely your responsibility. You should consult your investment adviser before making any investment decisions.