StockHouse LogoFollowing the sale of the 60-year old Sing Pao newspaper, Hong Kong's print media industry is once again rife with rumours of a possible ownership change at another old-time newspaper entity, Sing Tao Holdings [233]. For the latter, it would mean the second change of control in less than two years if the alleged sale proposal turns into reality.

Though the controlling shareholder, investment fund Lazard Asia, has rejected suggestions that it has made a decision to sell its 51.3% stake, such a possibility is not unlikely given the investment group's "company healing and dealing" philosophy. It is more a question of when, than if, the sale will happen.

Upon Lazard Asia's acquisition of Sing Tao Holdings from former owner Sally Aw of her 50.04% holding in March last year, Patrick Cheung, formerly chief executive officer of Lazard Asia Investment Management (HK) Ltd, was named as chairman of the newspaper group. Under his leadership, the Hong Kong Standard, the English-language newspaper owned by Sing Tao Holdings and the only local competitor to the South China Morning Post, assumed a new youthful image when it was re-launched as a tabloid named Hong Kong iMail on May 29 this year.

Cheung's marketing strategy appears logical and sensible. His idea is to avoid the head-on competition with the SCMP that the Hong Kong Standard had faced during its lifetime. The focus was shifted away from what had always been the SCMP's backyard market of expatriates and middle-aged local professionals and businessmen, to a younger local readership consisting mainly of overseas-born English-speaking Chinese and young local Chinese aged between 20 and 40. It is hoped that the new tabloid's circulation will eventually hit 70,000.

According to one industry observer, the Hong Kong iMail, since launching, has managed to grab some of the lucrative corporate announcement business from the SCMP by offering cheaper advertising rates. Although in terms of circulation, the tabloid is still a long way off from SCMP's 110,000, it has the advantage of being able to build up loyalty among younger readers, who may one day become a potent advertising clientele when they begin taking up decision-making positions within corporations.

Resignation prompts rumours

It can be argued that Lazard Asia would not want to consider a sale at this stage as it has yet to fully gauge the potential of the Hong Kong iMail, now only a few months into existence. However, with Cheung's resignation as CEO of Lazard Asia Investment Management (HK) Ltd in April this year, it is likely the incident has prompted Lazard Asia to contemplate an early sale. Hence, the market rumours.

With Cheung's expertise and experience in the areas of investment, management, strategic planning and finance, having once been a McKinsey partner, his ability to turn Sing Tao Holdings into a profitable concern need not be questioned. But if Lazard Asia really wants to pull out, he would be burdened with the task of finding a new financial partner should he wish to stake his career on Sing Tao Holdings.

The Company reported a net loss of HK$7.6 million ($974,446) for the six months to 30 September 2000, compared with a net profit of HK$10.5 million for the same period in 1999. The loss was attributed to lower advertising revenue resulting from a downward trending property market, as well as higher newsprint costs.

Newspaper publishing and commercial printing accounted for 60% and 39% of total turnover respectively, in the first half of the financial year. The commercial printing division enjoyed an operating profit margin of 15% during the period compared with the loss-making newspaper publishing division. However, it is this division that holds the most potential. An overall improvement for the full year is achievable given more stringent cost controls and barring a negative shock on the economic front.

The share price of Sing Tao Holdings has remained between HK$1.00 and HK$1.40 amid extremely thin volumes for the past three months. It appears the market has adopted a wait-and-see view towards Cheung and the task he faces in bringing about a success at the Hong Kong iMail and returning the Company to profitability. Until that happens, the share price is likely to remain rangebound.

Copyright: StockHouse Media Corporation