Published October 8, 2008

Cityneon shareholders: the envy of all

By SIOW LI SEN
Email this article
Print article
Feedback

CITYNEON Holdings - essentially a small contractor which puts up temporary structures for events and exhibitions - is suddenly in the enviable position of being fought over.

Usually ignored by punters and untraded on many days, Cityneon (which made $2 million for the first half of 2008 on $24.4 million revenue) gets 40 per cent of its business from Singapore and 40 per cent from the Middle East.

The two suitors for Cityneon are Yellow Pages and Star Publications (Malaysia). So far, Yellow Pages - which shone the spotlight on Cityneon when it announced in July that it was making a general offer at 55 cents a share - has fired the second salvo. Yellow Pages, led by its energetic chairman Stanley Tan, revised its offer upwards on Monday to 60 cents after Star's surprise 58 cents bid last Thursday.

So is Cityneon some hidden gem which has escaped punters' attention until now? It looks like a well-run company, holding its own in a crowded sector. But still, Cityneon is a small cog in the multi-billion-dollar business travel and high-value meetings, incentives, conventions and exhibitions (Mice) industry.

The Singapore Tourism Board (STB) has said it aims to double the spending by business travel and Mice visitors to $10.5 billion by 2015.

It is not hard to fathom Mr Tan's interest as Yellow Pages needs to diversify away from its publishing business. Yellow Pages said the diversification move will speed its transformation into a company that provides integrated directory search and advertising services across multiple platforms.

Cityneon will strengthen relationships with Yellow Pages' advertiser clients while the directory publisher's brand name, customer base and sales channels will be valuable to Cityneon.

But Cityneon is not an event organiser. More than 80 per cent of its revenue is from exhibition services, which is designing, fabricating and installing booth and pavilions, renting out those assets as well as providing electrical services and graphics.

One wonders whether being a contractor rather than an events organiser lessens its appeal.

Meanwhile, this move represents the first foray into diversifying away from Malaysia for Star's controlling shareholder Huaren Holdings.

Huaren Holdings is wholly-owned by the Malaysian Chinese Association (MCA) - the second-largest component party in the Malaysian ruling National Front coalition.

Star, which publishes Malaysia's largest English newspaper, is also a much bigger group. It has a market capitalisation of RM2.4 billion (S$1 billion) and posted first-half 2008 profit of RM44 million with cash of RM707 million and unsecured debt of RM250 million which matures in 2010.

Yellow Pages' market capitalisation is $60.9 million and it made a $2.4 million loss in the first quarter ended June 30. It has $35.6 million in cash, and borrowings are fixed-rate bonds of $129.8 million which will mature on Sept 30, 2009.

On the face of it, Star (with its deeper pockets) should be able to go for at least another round of bidding.

Cityneon minorities can only hope that Star comes back with a higher bid and starts a bidding war.

The combative Mr Tan, who ousted Yellow Pages' former board in a high- profile brawl last year, is not likely to shy away from a battle.

In any case, Mr Tan might see the current challenge from Star as a personal fight. Acting for Star is ANZ Singapore, which is led by managing director Bill Foo and AmFraser Securities. Mr Foo was among the group of Yellow Pages directors who were unceremoniously tossed out by Mr Tan.

Cityneon shareholders are not only being entertained but could even be paid to enjoy the show. What luck!