It was announced yesterday that Media Chinese
International (MCIL) has proposed to spin off its travel and travel-related
business and to have a separate listing on the Growth Enterprise Market of the
Stock Exchange of Hong Kong Ltd. The proposal is targeted to be completed by
end-2012.
MCIL will undergo a reorganisation as part of the
proposal. As such, five companies with limited liabilities have been
incorporated or acquired.
The proposal would result in a disposal of an about 25%
equity interest in Charming Holidays. Upon completion, MCIL will remain as the
controlling shareholder, holding circa 75% of the then issued share capital of
the Travel Group. More importantly, MCIL will continue to enjoy benefits from
the development of the Travel Group.
As a recap, the travel group is operated via its indirect
wholly-owned subsidiaries, Charming Hong Kong and Charming North America,
providing travel and travel-related services in Hong Kong and North America. As
of FY11, the travel group contributed 15% of revenue, while the remaining 85%
comes from its core business in print and publishing.
Net proceeds raised from the proposal will be used to
expand the travel group's existing business operations and the development of
other travel-related products, without relying on MCIL itself.
The proposal is at the preliminary stages, subject to
approval of the Stock Exchange of Hong Kong Limited and MCIL’s shareholders.
More details are expected to be announced in the event the proposal pans
out.
This enables MCIL to unlock the value of its investment in
the Travel Group as well as to better focus on its core business. Separately,
its earlier proposed capital distribution via dividends to its shareholders of
RM700mil is still pending.
Given the lack of details on the spin-off proposal at this
juncture, our earnings forecasts remain unchanged. We re-affirm our BUY
recommendation with an unchanged fair value of RM1.70/share based on a 10%
discount to our DCF value.
Source: AmeSeceurities
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