Written by Joseph Chin
Thursday, 24 September 2009 15:58

KUALA LUMPUR: Shares of The New Straits Times Press (M) Bhd jumped in the afternoon trade on Sept 24 after Macquarie Research upgraded the stock to outperform and a target price of RM2.50.

At 3.48pm, the share price was up 17 sen to RM2.15. There were 3.05 million shares done. Media Prima rose five sen to RM1.54.

The stocks bucked the overall cautious market where the FBM KLCI fell 1.22 points to 1,217.85. Turnover was 571.37 million shares valued at RM767.12 million.

Macquarie Equities Research said it initiated coverage on NSTP with an Outperform recommendation and a target price of RM2.50, based on a 12 times price-to-earnings (PER) for 2010E.

NSTP's three newspapers in its fold account for 35% of total circulation and 22% of total newspaper advertising spending (adex).

"We expect NSTP to benefit from the shift in readership from English to Malay newspapers as advertisers increasingly take advantage of this trend. In particular, we believe NSTP's key newspaper, Harian Metro, is poised to benefit from this shift as the country's most widely circulated newspaper (33% of Malay newspaper circulation).

"The key catalyst for NSTP lies in monetising this success. Malay newspapers currently make up only 21% of newspaper adex, despite having a 49% share of circulation," it said.

Macquarie Research said it expects improving advertising revenue in 2010E to boost NSTP's operating margins in 2010E, given the high proportion of fixed costs. Every 1% increase in its advertising revenue would expand its margins by 3% in 2010E.

It also said NSTP's major shareholder Media Prima, had at a recent analyst briefing, announced that it is weighing up various options to maximise value from its 43% stake.

The possibilities include (1) acquiring the remaining 57% via a share swap, (2) a dividend-in-specie to Media Prima shareholders and (3) an outright sale.

"Given the political sensitivities, we believe the third option is the least likely. Thus, we are not attaching an M&A premium to NSTP," it said.


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