Catcha Media announced on Bursa Malaysia yesterday that it had on 13 May 2013 entered into a term sheet agreement with Youth Asia SB for a proposed merger of approximately MYR60m in a newco which will own 100% equity interest in “Catcha Publishing Businesses’’, “Catcha Digital Businesses’’  and  Says  SB.  We  are  generally  positive  on  the development pending the disclosure of  more concrete details. Maintain BUY, with our FV still at MYR0.65.

-  Structure  of  proposed  merger.  According  to  the  proposed  merger, Catcha  Media  will  incorporate  a  new  company  (newco)  with  100  million ordinary  MYR1.00  shares  and  transfer  its  publishing  and  digital businesses  into  the  newco  for  35m  of the latter’s shares.  Meanwhile, Youth  Asia  SB  will  transfer  the  entire  business  of  its  100%-owned  Says SB into the newco for 15m of the latter’s shares, plus MYR6.0m cash, to be  satisfied  by  Catcha  Media,  and  which  will  be  paid  at  the  end  of  six months from the completion date, or 31 Dec 2013, whichever is earlier 

-  Generally  positive  on  this  development.  According  to  the announcement, Says SB owns and operates an online platform for social media  users  to  consume  online  news  as  well  as  provide  a  service  for advertisers  to  disseminate  information  in  their  brand  offerings, promotions  and  campaigns.  Based  on  a  quick  check  on  Says SB’s background  and  our  sources,  we  gather  that  the  company  is  profitable. We were made to understand that the proposed merger may turn Catcha Media’s digital division into one of the most profitable online companies in Malaysia.  

-  Maintain BUY, MYR0.65 FV unchanged. Nevertheless, since not much detail  was  revealed  in  the  announcement,  we  will  be  seeking  for  more details from Management and updating investors in due course. As such, we  are  keeping  our  forecasts  and  valuation  at  this  juncture.  Maintain BUY, with our SOP-based FV of MYR0.65 unchanged.

Source: RHB