what is the good or the bad news, page-3

Hi Arthur,

Welcome back, to HC and to a brand new 2003. Trading this year will be a bit like last year, the year before that, and the year before that. Full of highs, lows, near misses, sure things, considerable speculation and some sound reasoning.

For TMS, 2003 will be a year of greater certainty than was the case for much of 2002.

By way of recap:

VAL MORGAN:
On 24/12/02, TMS announced that it had sealed deals to sell Val Morgan to the cinema exhibitors in return for being released from existing exhibitor liabilities, and a deferred payment of $2.4m. The Val Morgan sale (whilst subject to shareholder approval in February) has now moved to transition with Terry Savage (Executive Chairman, VM) resigning from the TMS Board. The VM sale covers operations in Australia, New Zealand, and in South America. The Hong Kong operations will be closed down. No word yet on the UAE operations. The USA exit arrangements remain intact (ie: Screenvision revenue sharing arrangements with TMS, to the value of US$4.0m+ over the next 2 years, plus the Malco cinema circuit, for a 3rd year).

PLACEMENT:
The ANZ, PBL and TEN have agreed to an immediate $13.9m placement, resulting in the likely issue of a further 556m shares (@2.5c, s/to shareholder approval). Previously, the agreement was for ANZ to take the placement, resulting in an injection of ~$1.5m. All 3 will also be allotted 50m options @3c, exercisable over the next 3 years (terms, unchanged).

RIGHTS ISSUE:
Previously, this was the main plank of the re-capitalisation exercise, with a 5:2 Rights Issue (fully underwritten), plus matching options @2.5c, to raise $11.4m. Now, the Rights Issue will proceed, same terms (sans the Options), but will not be underwritten. Instead, PBL and TEN will take up their Rights' entitlements, meaning that a minimum of $2.9m will be raised in this way.

MINIMUM FUNDS TO BE RAISED:
Previously, TMS was to raise $12.9m (maximum). Now, TMS will raise $16.8m (minimum), and $25.3m (maximum).

LOAN GUARANTEES:
These remain unchanged from the previous announcements, with PBL and TEN committing to this jointly. The amount of debt covered in this way exceeds $13m.

DEEMED ASSOCIATION:
On 27/12, TEN advised the ASX that it was now in deemed association with CPH and PBL, thus equating to a 25.55% deemed interest in TMS. On 30/12, PBL issued its deemed association notice, confirming that it was in deemed association with TEN (but not with CPH), thus equating to a 19.3% deemed interest in TMS.

The de-coupling of CPH from PBL leaves an interesting, and unanswered question surrounding TMS - namely, whether CPH is preparing for a possible TMS bid, or not.

NOVEMBER DEBT:
On 30/12, this was confirmed @$56m (unchanged from October).

NOVEMBER OPERATIONAL CASHFLOW:
Customer receipts returned to double figures, resulting in $11.5m for the month.

POSITIVE CASHFLOW FOR NOVEMBER:
November's results accelerated the positive cashflow trend achieved in October (ie: $352K). In November, TMS' positive cashflow was $1.6m. This appears to have continued into December.

GLOBAL TELEVISION:
Global's current performance is exceeding budgeted expectations (according to recent commentary from TMS management, at the AGM and elsewhere).

SHARE PRICE PERFORMANCE:
Last week, TMS shares peaked @10.5c, and closed out Friday @7.8c (with a further 130K traded overnight @7.9). Since 27/12, there have been 3 40m+ trading days. On Friday, 9.6m shares traded (between 8.6 and 7.6). Overnight, 780K are currently sought @7.7, and 19K are on offer @7.9.

REVISED PRICE TARGET:
My revised price target for TMS (post dilutionary impact, all sources), is:
1)
in FY03, >13c; and
2)
in FY04, >17.5c.
In current terms, this equates to a share price of >60c (on current shareholding levels).

FURTHER MOVES AFOOT:
PBL has already announced that it will be looking at its in-house broadcasting costs in 2003. Already TMS does all of TEN's IHB work, so TMS is well placed to pick up on PBL's IHB work, as well.

That's all for now, but I topped up my holdings @7.6 on Friday.