Media Chinese International - Raising estimates and TP; BUY | I3investor

Media Chinese International - Raising estimates and TP; BUY

Date: 
2015-11-27
Firm: 
MAYBANK
Stock: 
Price Target: 
0.73
Price Call: 
BUY
Last Price: 
0.12
Upside/Downside: 
+0.61 (508.33%)
  • Travel segment’s outperformance will taper off in 2HFY3/16 but newsprint consumption has been lower than expected.
  • Raise EPS forecasts by 11%-13% and DPS forecastsby 39%-41% on lower newsprint consumption and higher DPR.
  • Roll forward base year to end-CY16; on an unchanged 1.3x P/BV peg, we derive a new MYR0.73 TP (+12%). Maintain BUY.

What’s New

MCIL held its post-2QFY3/16 results briefing yesterday. Notably, the travel segment outperformed on account of stronger HKD in 1HFY3/16 owing to the currency’s peg to USD. This made travelling much cheaper for Hong Kong travellers. However, we doubt that the strong travel segment earnings will repeat in 2HFY3/16 as many travellers have abstained from booking holiday destinations in Europe due to recent violence in the region.

Interestingly, what surprised us positively was MCIL’s drastic cost saving initiatives in the midst of the current weak economic environment. We understand MCIL managed to reduce annualized newsprint consumption by ~20k tonnes, providing some support in keeping EBITDA margins at 15%-16% despite lower print adex and circulation revenue YoY.

What’s Our View

Consequently, we trim our annualized newsprint consumption from 130k tonnes to 120k tonnes (10k tonnes less than guided, to be conservative).This lifted our FY16-FY18 EPS forecasts by 11%-13%. Separately, we also raise our FY16-FY18 DPS forecasts by 39%-41% as we raise our DPR assumption from 40% to 50%. Recall that the recent interim DPS of US0.5cents (2.2sen) translates into 50% DPR. In terms of valuations, we roll forward our base year to end-CY16 from end-CY15. Based on an unchanged 1.3x P/BV peg, we derive a new MYR0.73 TP (vs MYR0.65 previously). Despite its share price appreciating 3% yesterday, PER valuations are still <10x and EV/EBITDA valuations are still <5x. To boot, net dividend yields are now very attractive at >6%. Maintain BUY on MCIL.

Source: Maybank Research - 27 Nov 2015

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