Listing will draw more investors’ attention

Though it has largely stripped down to being a pure media play, there is a compelling operational depth at Tiso Blackstar Group (TBG) that most market watchers have been overlooking.

The core remains Times Media Group — the largest national English publishing

group (with titles like the Sunday Times, Business Day, the

Sowetan and the Financial Mail) but the company has made great strides online and now ranks as the secondlargest digital publisher in SA.

Then there are the niche broadcast media assets in SA, as well as promising radio and television platforms in Kenya, Nigeria and Ghana. TBG is also the owner of a sprawling music (Gallo) and independent film catalogue, and a serious player in the retail solutions market through Hirt & Carter.

There are several factors that make TBG worth mulling as an investment at this juncture, besides the underlying operating assets appearing woefully undervalued.

The first is that, following the sale of its R1.5bn stake in empowerment company Kagiso Tiso Holdings (KTH), TBG is poised for deal making. The KTH proceeds will fund a special dividend of R40m (around 15c/share) and also settle debt at the centre, relieve TBG of a heavy interest bill and set up the company for a sizeable acquisition (or two). At a recent investment presentation TBG CEO Andrew Bonamour indicated a preference for pursuing a “chunky” deal — which reckons might well be a gamechanging acquisition in terms of economies of scale in this media conglomerate.

The balance sheet could be further bolstered if TMG receives attractive offers for its remaining noncore investments — the 51% stake in steel tubing and piping specialist Robor and 100%-owned cladding and roofing business Consolidated Steel Industries.

TBG’s endeavours to seek out a value- and earningsaccretive deal are helped enormously by its core media business having turned profitable. There is also the added advantage that media asset values have dwindled markedly in the past five years. It is common knowledge that TBG was interested in unlisted Primedia, and this should provide a hint of the scale of a possible acquisition.

Operationally, what management did better than most other local media companies — even though us journalists hate to feel the squeeze — was to

embark on a streamlining and cost-cutting exercise that did not sacrifice the quality of content. Acknowledging that “content is king” will pay off handsomely in the longer term, as quality journalism draws eyeballs — and as readers are less resistant to paywalls when reliable newsgathering stands out in a fragmented social media segment that is increasingly infiltrated by so-called “fake news”.

IM believes TBG is worthy of closer investigation at current share price levels. Net asset value — which obviously includes a heap of goodwill and intangibles — stands at R13.73/share. But a key figure is that cash flow from operations topped R280m, equivalent to more than 100c/share for the interim period.

A key change, set for June this year, will be the (long overdue) transfer of TBG’s listing from the AltX to the JSE’s main board. TBG is not big enough to break into any significant index that is tracked by the big institutional investors, but the move will bring the share to the attention of many more mainstream investors.

A steady second-half performance could well see sentiment start turning for TBG.