KUALA LUMPUR (Oct 10): CGS-CIMB Research has maintained its "Reduce" rating on Media Prima Bhd at 45 sen with an unchanged target price of 38 sen, and said the group's turnaround will require a significant overhaul of operations that will be painful, costly and take years to achieve.

In a note Oct 9, the research house said tycoon Tan Sri Syed Mokhtar Albukhary-owned Aurora Mulia Sdn Bhd had on Oct 7 acquired a 70% stake in Dilof Sdn Bhd to ensure the continuity of Utusan Melayu and Kosmo!, adding that Dilof holds the publishing permits for the newspapers.

It said this acquisition made the market curious on whether Syed Mokhtar, who is also the largest shareholder of Media Prima, was planning something that involved both Media Prima and Utusan.

CGI-CIMB Research suggested three ways in which Syed Mokhtar could decide to consolidate his news operations:

1. forming a new holding company to house all of the news titles, which results in The New Straits Times Press (M) Bhd (NSTP) being extricated from the integrated media group (best-case scenario)
2. parking all of his publishing businesses under NSTP (worst-case scenario), or
3. keeping the newspaper companies separate, as they are now, but all sharing common back-end facilities (neutral development).

Nonetheless, even the best-case scenario might not be the most ideal for Media Prima, the research house said.

"Although NSTP has been Media Prima's biggest headache, the group still has an unprofitable TV division to deal with, going forward. We are not convinced that Media Prima's years-long cost-cutting exercise will nurse it back to financial health," it added.

The research house believed that further cost-cutting could even compromise Media Prima's operations and content quality.

"The only re-rating catalyst for Media Prima lies in the possibility of Syed Mokhtar or Aurora Mulia triggering a mandatory general offer (MGO)," it said.

The research house estimated that the share of NSTP in Media Prima's book value as at end-June 2019 amount to RM284.2 million, or 25.6 sen per share.