Noontalk’s minorities should press the board to justify rationale for share purchase mandate

FOR a company with a market capitalisation of only S$19 million, Noontalk Media garners surprisingly strong interest from readers of The Business Times.

Whether the story is about its initial public offering in November last year, or the losses it reported for its most recent financial year, Noontalk chalks up consistently high page views.

This might simply reflect the nature of its business: Noontalk manages professional entertainers, produces films and TV shows, and organises events. The company’s chief executive and controlling shareholder – with a 62.6 per cent stake – Dasmond Koh is himself a former radio deejay and actor who still finds time to co-host The Sheng Siong Show.

In the spirit of service to shareholders of Noontalk who may be among those reading our stories, this column suggests they should vote against the company’s share purchase mandate at the extraordinary general meeting (EGM) scheduled for Oct 23.

At the very least, shareholders of Noontalk should press its board to justify its stated rationale for proposing the share purchase mandate. In particular, Noontalk’s board should be asked to identify the threshold price below which repurchasing shares in the market would create value for the company’s remaining shareholders.

If Noontalk’s board is unable to identify that threshold price, it seems pointless – perhaps even risky – for the company’s shareholders to allow it to undertake share repurchases at any time.

Noontalk’s board should also explain why it is even considering returning capital to shareholders less than a year after listing on Catalist at great expense. Surely the company’s board and management should instead be focused on expanding and strengthening its business and restoring its profitability.

Chalking up losses

Noontalk sold 22 million shares at S$0.22 apiece through public offer and placement in November last year, raising gross proceeds of S$4.84 million. After subtracting listing expenses of S$1.59 million, the company was left with net proceeds of almost S$3.25 million.

The company said that it plans to spend S$2.28 million on extending its regional footprint and building up its businesses, especially in the film and drama field. A further S$0.48 million is earmarked for investment in multimedia technology. The remaining S$0.48 million is to be used for working capital and general corporate purposes.

Noontalk reported a loss of S$3.2 million for the financial year to Jun 30, versus a net profit of S$22,407 for the previous financial year. Revenue fell 34 per cent to S$4.2 million.

The company’s administrative expenses increased 112 per cent to nearly S$3.7 million, due to non-recurring listing expenses as well as higher staff costs and depreciation.

Excluding the listing and associated expenses, Noontalk would still have reported a loss of S$1.7 million.

Noontalk ended its FY2023 with a net cash position of S$3.2 million, and net asset value (NAV) of S$0.0263 per share.

Shares of Noontalk last traded on Monday (Oct 16) at S$0.096.

With the share purchase mandate, Noontalk would have the opportunity to scoop up shares at less than half the price at which it sold them to investors in November last year.

Yet, if Noontalk remains in the red, repurchasing its shares would effectively increase its loss per share on top of reducing its cash holdings, which it may need to tap to expand and strengthen its businesses.

The company’s relatively low NAV per share would also be diluted if the shares are repurchased at around current market prices.

Focus on growth

The share purchase mandate that Noontalk is putting forward at the coming EGM is not unusual, of course. Many blue-chip companies regularly put similar share purchase mandates before their shareholders.

These companies often state that their share buybacks are purely to meet their obligations under their employee share-based compensation programmes. Using treasury shares for these share-based schemes avoids the dilutive impact of issuing new shares.

This column is not suggesting that Noontalk should be held to a different standard. Yet, its shareholders should ask themselves why they invested in this tiny company in the first place.

Small, entrepreneurially-run companies operating in fast-evolving markets are attractive for the explosive growth they might offer one day.

Noontalk has certainly not been shy about touting its own growth potential. When it released its FY2023 results, it noted digital content consumption through on-demand streaming video platforms had surpassed cable and broadcast TV in 2022.

“This shift not only reflects a fundamental change in consumer behaviour, but also uncovers promising avenues for market growth,” it said.

Noontalk added that it sees vast potential in artificial intelligence as well as virtual and augmented reality technologies, and is seeking strategic alliances in these fields to drive its growth.

Noontalk said that it also sees continued growth in demand for in-person entertainment across the region, with Singapore shining as a hub for live events. On top of that, it has invested in The Chosen One, a movie of the supernatural genre filmed in Singapore and Penang that is expected to be released next year.

Shareholders of Noontalk should push the company to dedicate all its attention and resources to positioning itself to reap big returns from these exciting opportunities. This is simply not the time to be getting distracted by share buyback plans.