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MNC Stock Takes Pounding After Losing Courtroom Battle Over TPI to Tutut
Francezka Nangoy | April 15, 2011

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Shares of Media Nusantara Citra fell to their lowest level in more than four months on Friday after a court ordered it to return its 75 percent stake in broadcaster MNC TV to previous owner Siti “Tutut” Hardiyanti Rukmana.

But analysts said the case was far from closed, with the matter likely to be appealed all the way to the Supreme Court. They added that the negative market sentiment for MNC was temporary.

The stock slid 3.5 percent to Rp 820, marking its lowest level since Dec. 9, when it closed at Rp 780.

The Central Jakarta District Court ruled on Thursday that Siti ‘‘Tutut’’ Hardiyanti Rukmana, the eldest daughter of late President Suharto, would regain her majority stake at the station, which was formerly known as Televisi Pendidikan Indonesia (TPI). She was also awarded Rp 680 billion ($78 million) in damages. MNC, owned by media mogul Hary Tanoesoedibjo, promised it would appeal.

Haryajid Ramelan, chief of brokerage Capital Bridge Indonesia, said the ruling’s affect on MNC’s stock would be short lived. “The case will have a quite an impact on MNC’s shares, but for the long run, MNC has bigger TV stations to rely on,” he said. MNC has broadcasters RCTI and Global TV in its portfolio.

But he warned that prolonged legal action could take a toll. “Because of the uncertainty with the legal process, investors might choose to sell their shares,” he said.

Investment firm CLSA in a note to clients acknowledged the impact of the ruling in the near term sentiment. However, with MNC TV accounting for 15 percent of its parent’s revenue, “any assessment at this stage is premature due to uncertainty over the case.”

In Friday’s note, CLSA rated the shares “buy,” sets a price target of Rp 850.

The dispute over TPI began in 2002, when Tutut offered Hary a stake in exchange for settling a $55 million debt. But the relationship eventually soured, with Tutut claiming that Hary’s company, Berkah Karya Bersama, had improperly called an extraordinary shareholders’ meeting in 2005 to take a 75 percent stake in the broadcaster, effectively taking it over.