• We maintain our HOLD recommendation on Media Chinese International (MCIL) and keep our fair value of RM0.24/share pegged to a P/B multiple of 0.5x after the group issued a profit warning.
• In its profit warning, the group said it expects its full-year FY19 to be loss-making mainly from a provision for the impairment of goodwill at about US$15mil (roughly equivalent to RM63mil) relating to one of the group’s business units. As the provision for impairment of goodwill would be a one-off item, we keep our forecasts unchanged as the FY19 results less exceptional items is expected to remain the same.
• Overall, we believe MCIL’s prospects continue to remain bleak due to: (i) declining newspaper circulation with the rising availability of digital content in all its operating regions; (ii) subdued adex outlook against the backdrop of weaker consumer sentiment; and (iii) as the growth of its digital revenue remains insufficient to offset the decline in traditional media.

• We reiterate our HOLD recommendation as we believe MCIL is fairly valued with its negative prospects priced in.

Source: AmInvest Research - 15 May 2019