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Cathy Holcombe

United States-based fund management group Franklin Resources has bought an 11.18 per cent stake in SCMP (Holdings), making it the company's second-largest shareholder after Robert Kuok's Kerry Media.

 With the disclosure, announced yesterday by the Hong Kong stock exchange, Franklin Resources emerged as the main buyer of a block of SCMP shares released into the market last week by Malayan United Industries (MUI).

 Since January, MUI has reduced its stake from 23.29 per cent to 8.14 per cent.

 Last week, Goldman Sachs, acting on behalf of MUI, handled the placement of 225 million shares, or 12.68 per cent of SCMP's shares, at $5.08 per share.

 Yesterday, SCMP closed up five cents to $5.05.

 Franklin Resources has recently disclosed stakes of more than 10 per cent in several other Hong Kong-listed companies, including Hang Lung Development and H shares Shanghai Petrochemical, Dongfang Electrical Machinery and Maanshan Iron & Steel.

 It was unclear last night which arm of the Franklin group had taken the stake - Franklin Mutual, run by the high-profile Michael Price, which in the past year took a 6 per cent stake in the US media giant Dow Jones company; Templeton Mutual Funds run by Mark Holowesko; or Templeton Emerging Markets, headed by Mark Mobius.

 Most of the group's interests in Hong Kong companies, estimated at more than US$3 billion, is through the Templeton funds, an executive with the Franklin group said.

 Templeton has taken a beating on some of its smaller Hong Kong investments in the past year.

 It held an 11.93 per cent stake in Peregrine Investments Holdings, which is in the process of liquidation, and an estimated 8 per cent stake in South Sea Development, whose share price has plummeted to 19.6 cents from $1.23 in September.

 Its estimated 9.5 per cent stake in Sing Tao - which owns the Hong Kong Standard - has fallen in value by 45 per cent in the past three years.

 Salomon Smith Barney media analyst Kaushik Shridharani said the SCMP stake 'is a good buy. I think the shares are worth a lot more than they are trading at now'.

 Mr Shridharani forecasts SCMP's earnings growth will be lacklustre in the next two years but will rise by 50 per cent over the coming five years.

 He says fund managers are willing to look at earnings prospects for 2000 and beyond, because of the general dismal outlook in the nearer term.

 'Most fund managers can't look at 1998-99, because there's nothing more to see there,' he said.

 'So you can either continue to shed tears or look at what is coming after.'  A Franklin Resources executive said SCMP shares would most likely be spread among funds run by Templeton Mutual Funds, one of the largest foreign equity investors in Hong Kong companies.

 Through holdings in blue chips such as HSBC Holdings and Cheung Kong (Holdings), Templeton has about US$3.43 billion invested in Hong Kong's stock market.

 Franklin Resources manages US$230 billion in assets worldwide.



Franklin Resources buys up SCMP shares sold by MUI