Speculation on Tencent interest fuels rise in SMI Culture shares
Analysts say Tencent investment in SMI would provide new revenue streams in media sector
SMI Culture Group saw its shares surge to a three-month high yesterday, largely on speculation mainland internet giant Tencent Holdings planned to buy the media services company.
In a filing with the Hong Kong stock exchange, SMI Culture said its board took note of reports in Hong Kong and on the mainland "regarding the intention of an investment fund of Tencent Holdings Ltd to subscribe for new shares of the company".
"The board would like to clarify that there has been no official approach from the investment fund with respect to the subscription of new shares of the company," the statement said.
SMI's shares rose 56.72 per cent to HK$1.05 at midday before the company requested a halt to its trading at 1pm. It was the highest that the stock reached since closing at HK$1.06 on March 13.
The movement in the share price was apparently sparked by certain online media reports about a plan for a Tencent-controlled investment fund to buy into SMI Culture for an undisclosed amount.
"Tencent does not comment on market speculation," said a spokesman for Asia's largest listed internet company.
Ricky Lai, an analyst at Guotai Junan International, said a possible reason for Shenzhen-based Tencent being interested in SMI was to secure its own large, traditional media and entertainment business.
"SMI is operating in many of the same businesses as ChinaVision, and those would provide new revenue streams for Tencent," Lai said.
Unlike Alibaba's ChinaVision deal, Tencent will likely buy into SMI with a minority shareholding, he added.
In March, rival Alibaba bought a controlling interest in ChinaVision Media Group for HK$6.24 billion.
That acquisition will provide mainland e-commerce kingpin Alibaba with a 60 per cent stake in ChinaVision and entry into various new businesses including movie and television programme production and distribution, television advertising sales, mobile digital content delivery and magazine publishing.
Formerly known as Qin Jia Yuan Media Services, SMI posted HK$191.4 million in revenue last year, but suffered a HK$674.3 million loss mainly because of impairment for certain assets, provision for inventories, and charges to administrative and operating expenses.