Frankly Speaking

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Who’s getting the warrants? Last week, Media Prima Bhd completed its RM150 million bond issue that came with 50 million detachable warrants. Affin Bank Bhd and Affin Investment Bank Bhd are the primary subscribers to the bonds which they have taken up on a “bought deal basis”. 

Together with the 50 million warrants, another 49.2 million warrants were issued in the course of the privatisation of The New Straits Times Press (M) Bhd.

The 49.2 million warrants were split equally for distribution to the shareholders of NSTP and Media Prima. But what’s unknown until today is who will end up with the 50 million warrants that Affin Bank and Affin Investment are holding.

The warrants have a five-year tenure and exercise price of RM1.80. Given that the share price of Media Prima is RM2.25, and is poised to grow further as it is a dominant player in the free-to-air television market, the warrants are attractive.

Based on last Friday’s close of 63 sen, the 50 million detachable warrants held by Affin Bank and its investment banking arm are worth some RM31.5 million.

Should Affin group place out the warrants, the RM31.5 million is easy money for the banking entity to make. On top of that, the bonds carry a coupon rate of 4.95% annually, which is rather attractive.

The question is not so much how much Affin will profit from the sale of the block. The focus is more on who will end up with the block of warrants.

This will probably be closely watched by many, including those on the political scene, considering that getting hold of the 50 million warrants would translate to a 5.25% stake in the Umno-controlled media group, given the conversion ratio of one detachable warrant for one ordinary share.

Following the privatisation of NSTP, Media Prima emerged as the country’s media giant, offering TV, print, radio, new media and outdoor advertising platforms. Controlling the enlarged group could actually mean controlling the local media to a certain extent, especially in the Malay media segment.

The existing substantial shareholders of Media Prima are the Employees Provident Fund (22.1%), Gabungan Kesturi Sdn Bhd (12.529%) and Altima Inc (8.99%). Will the block of warrants end up with affiliates of the existing major shareholders?
Kudos to Supermax Supermax Corp Bhd has done investors a favour by publishing a detailed analysis of its financials in its 4Q results announcement that was posted on Bursa Malaysia’s website.

For ease of reading, the company included in its announcement separate tables that list its dividend track record, as well as the historical performance of its key performance ratios such as Ebitda (earnings before interest, tax, depreciation and amortisation) and pre-tax margin.

It was not shy in divulging information on its receivables and inventory turnover cycles, details on the expansion of production capacity and most importantly, some “earnings guidance” for the current financial year. 

In the notes accompanying its 4Q results, Supermax actually stated that it has “revived the internal target for its FY2010 from the initial target of 50 sen earnings per share to 62 sen, or RM168 million profit after tax”.

Very rarely do companies reveal their internal target on future earnings in announcements to Bursa Malaysia. Most companies tend to communicate such information, often disguised as “earnings guidance”, to a small group of analysts and fund managers during closed-door briefing sessions.

Such privileged information is used by analysts and fund managers to produce their earnings forecasts on the companies concerned, and is only made known to a larger audience when the reports are picked up by their clients.

This practice has often put retail investors, who are at the bottom of the food chain when it comes to getting the information, at a disadvantage.

It is only fair that investors have the same access to such privileged information as fund managers and analysts. The best approach is to have the presentation slides for the analysts and fund managers posted on the Bursa Malaysia website for all to see.
Getting used to fair competitionThe Competition Bill 2010, which was tabled for first reading in Parliament last week, marks a new chapter in the country’s economic history. By prohibiting monopolies and cartels, the new law aims to encourage economic development and reduce the burden of price-fixing on consumers.

That surely spells good news for the public and the corporate world as well, as it should free up the market in a number of important sectors. The car industry is notable in this regard, as the proposed law would bring key policy elements under scrutiny. Could the incentives given for increasing local components in cars be challenged as a barrier against foreign car manufacturers, for instance? Also, do Approved Permits granted for the import of vehicles constitute an unfair trade advantage? Policymakers would have their counter-arguments to these views. While that means there are no straightforward answers, the rules will certainly be different in the near future.

In commodities, it will be interesting to see what happens in 2011, when the monopoly that Padiberas Nasional Bhd (Bernas) holds on the import of rice expires. Will competition be introduced in the sector, in line with the new law, and how much will prices of the staple be reduced as a result?

Sectors like telecommunications, energy and water pose additional barriers to new entrants because of high capital requirements and regulatory frameworks. Market saturation and excess capacity pose additional impediments. How the competition law is applied to these areas to benefit users and industry players will bear watching closely.
This article appeared in Corporate page of The Edge Malaysia, Issue 801, Apr 12-18, 2010