What's down the track for Next?
With the group's failure to sell its television and print assets in Taiwan, some analysts say it should refocus on its HK core
After the ill-fated attempt to sell its profitable print business in Taiwan, a big question mark hangs over how Next Media, the media empire controlled by Hong Kong mogul Jimmy Lai Chee-ying, will sustain itself.
Some analysts are concerned about the group's financial health, with Next TV, Next Media's electronic business on the island, and Sharp Daily, its free daily newspaper in Hong Kong, losing money and eating into the group's cash flow.
When the group said the proposed sale of its Taiwanese print and television assets fell through on the deal's March 28 deadline, the group's share price plunged to the level seen half a year ago.
Lai said the group was in talks to divest Next TV while keeping the print business in Taiwan.
Investors have been expecting the media firm, 73.5 per cent-controlled by Lai, to shake off the loss-making Taiwanese operations, especially its television business, and focus on its hometown, Hong Kong.
Lutz Kihm, an adviser at DJE Kapital, which holds 4.07 per cent of Next Media and is the second-largest shareholder after Lai, said he thought the best plan now was to sell the Taiwanese television assets and focus on its core business - print in Hong Kong and Taiwan - as well as the internet business. "Here Next has an edge over its competitors," Kihm said.
He said the Taiwanese print sale was off but there still seemed to be possible buying interest for the television assets. "There were offers of about NT$1.5 billion," he said.
Next Media's print business had generated fairly stable free cash flows of up to HK$600 million per year, Kihm said. Even though investments in Next TV and Sharp Daily had eaten into this cash, he said there was "absolutely no need" to raise fresh funds, especially after the sale of the television business.
Francis Lun Sheung-nim, managing director of Lyncean Securities, said: "The most direct impact [of the failed deal] on the company is that it won't harvest the cash gain - hence the fall in its share price."
But he said Next Media was not in urgent need of funds and should be able to maintain normal operations, despite the frustrated sale.
Next had said the sale of the Taiwanese assets to a group of Taiwanese businessmen for NT$17.5 billion (HK$4.66 billion) would have netted Next a gain of HK$2.28 billion - had it gone through.
Next Media's share price dropped 25.6 per cent to HK$1.17 on April 2 on news the assets sale was off. On October 18 - when the sale was announced - its shares surged 41 per cent to HK$1.58, the highest level in nearly four years. It closed at 85 HK cents yesterday.
According to the company's interim results, released in December, Next's net loss nearly tripled to HK$928.39 million in the six months ended September 30 from a year earlier, mainly due to its television business in Taiwan.
Lai said the two major outlets of the print business - the Taiwanese editions of Apple Daily and Next Magazine - could produce NT$1.3 billion in profit each year, which would help finance continued publication of Sharp Daily and Me magazine.
Amid market rumours of staff lay-offs, the company said in a filing to the Hong Kong stock exchange last month that it had no plan to retrench employees from its Taiwanese Apple Daily newspaper but that it would consider closing down Me.
Lun said the best choice for Next was to completely close its Taiwanese operations and focus all its resources on Hong Kong, where the competition between the Chinese-language press was intense.
"At least [Lai] should shut down the television business - it's burning cash and has wasted too much of his energy," Lun said.
The financial report shows that in the reporting period Next's operations in Hong Kong accounted for 57.5 per cent of its revenue, with the Taiwanese operations contributing the rest.