The company’s fortune turns from bad to worse after Umno was clearly ousted during the last GE
By NG MIN SHEN
The entry of a new single largest shareholder may provide a temporary respite to Utusan Melayu (M) Bhd, but asset hiving, revenue generation and debt trimming remained challenges for one of the country’s oldest newspaper companies.
The publisher, which previously had political party Umno as the single largest shareholder, had tailspinned in recent years with rising debts, exodus of readers and shrinking revenues.
Interest in the newspaper, which had been the mouthpiece of Umno leaders to prop up their political agenda, heightened when Utusan executive chairman Datuk Abd Aziz Sheikh Fadzir acquired a 31.61% stake or 35 million shares in the Practice Note 17 (PN17) company.
The company’s fortune turned from bad to worse after Umno, the leading party of the coalition that ruled the country for 61 years, was clearly ousted during the last general election (GE).
Umno’s holding in Utusan had shrunk from 49.77% to 18.16%, trimming the political party’s control of the group that publishes Utusan Malaysia — Malaysia’s oldest operational Malay newspaper — and the tabloid Kosmo!.
The group, which had recently dismissed more than 600 staff, is also saddled with estimated debts of RM130 million and numerous legal claims, including the recent Kuala Lumpur High Court decision favouring Redberry Sdn Bhd over the return of a RM8.5 million deposit paid to the former in April last year.
The share price of the company also took a beating, slumping to a record low of nine sen from a 52-week high of 51 sen.
Utusan’s share price, however, had rebounded strongly since news of its chairman’s share purchase, rising more than 130%.
But the investment community remained coy on the newspaper’s prospect.
“The change in management is positive in some respects — it could spark a change in the orientation of the editorial slant, but there’s no telling if that’s sufficient to turn the company around,” an analyst at a research house told The Malaysian Reserve.
The analyst said many readers prefer to read their news online rather than in print, which in turn has caused advertising revenue to switch away from print to online media.
All newspapers in the country are facing similar financial challenges as readers took to the online versions which are free.
“If there is no money from cashflow, they may choose to further monetise some of their assets. But even this may not be enough to turn them around,” the analyst added.
Abd Aziz had purchased 35 million shares at 19 sen per share for RM6.65 million, a premium of 7.5 sen or 65.2% over the stock’s last traded price of 11.5 sen apiece as at Jan 31, 2019.
The shares were acquired via Abd Aziz’s company, Opulence Asia Sdn Bhd from Umno, which was the largest shareholder at the time with a 49.77% stake or 55.11 million shares.
Utusan in a separate filing on Feb 13 said Umno had disposed of 35 million shares on Feb 8, leaving it with 20.11 million shares or a 18.16% direct stake in the group.
The group also told Bursa Malaysia on Feb 4 that Abd Aziz had given his notice of intention to deal in securities during a closed period pending the announcement of the company’s financial results for the fourth quarter ended Dec 31, 2018 (4Q18).
Abd Aziz, who is also a former Umno deputy youth chief, previously served as MP for Kulim-Bandar Baru, until his defeat in the 14th GE, when he lost to PKR’s Datuk Seri Saifuddin Nasution Ismail, currently domestic trade and consumer affairs minister.
He has also previously held chairmanships and directorships in Kretam Holdings Bhd, Rangkaian Hotel Seri Malaysia Sdn Bhd, Destini Bhd and Gold Bridge Enginee- ring and Construction Bhd.
Utusan, which has been making losses since 2012, fell into PN17 status on Aug 20 last year after it defaulted on its RM1.18 million principal and profits payment to Maybank Islamic Bhd and Bank Muamalat Malaysia Bhd, and was unable to provide a solvency declaration to Bursa Malaysia.
According to Utusan’s financial statements for 3Q18, the group had long-term debt of RM83.5 million and short-term debt of RM54.3 million as at end-September 2018, while total liabilities amounted to RM318.56 million.
In contrast, its cash and bank balances stood at RM12.78 million as at end-September 2018.
Total assets amounted to RM371.78 million, of which property, plant and equipment accounted for RM196.28 million and investment properties contributed RM89.75 million.
Utusan has tried to improve its balance sheet, offering a voluntary separation scheme to over half of its 1,500 staff.
It had also gone into an asset stripping mode. In November last year, the company signed a conditional sale and purchase agreement with Strong Skyhutch Sdn Bhd to sell a leasehold land parcel in Jalan Tiga off Jalan Chan Sow Lin, Kuala Lumpur, for RM18 million, with an expected net gain of RM16.9 million.
In December 2018, the company announced its disposal of a five-storey corner shop office in Section 14, Petaling Jaya, to Eden Resources Sdn Bhd for RM7 million.
But the group faces legal action from Nylex (M) Bhd and Redberry who are seeking refunds of their deposits totalling RM18.5 million.
Utusan’s share price closed two sen lower at 20 sen last Friday, valuing the company at RM22.1 million.
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