Investment Highlights

• We maintain our HOLD recommendation on Media Chinese International (MCIL) with unchanged fair value of RM0.18/share, pegged to a PB of 0.4x, which is in line with its 1-year historical PB.

• We cut our FY21F–FY22F forecasts by 34–45% to account for the dismal outlook for its publishing & printing and travel segments as sentiments are expected to be negative even after Covid-19 containment measures are eased.

• MCIL’s 4QFY20 core loss of RM7mil, brings FY20 core profit to RM31mil after excluding an RM1mil exceptional loss due to provisions for impairment of intangible assets and PPE. The group’s FY20F results beat our expectations by 8% whilst falling 22% short of consensus’ full-year forecasts.

• YoY: FY20 core profit improved marginally due to the exclusion of RM80mil exceptional losses in FY19 mainly from provisions for impairment of goodwill, PPE and intangible assets. This was despite revenue slumping 16% due to the impact of the Covid- 19 pandemic since January 2020, on top of a seasonally weak quarter for its publishing a printing business.

• FY20 saw negative currency impacts as both the MYR and CAD weakened against the USD, impacting MCIL’s turnover and PBT by RM11mil and RM1mil respectively.
• FY20 YoY segmental analysis:
• Publishing & printing: Segment PBT of RM29mil was recorded in FY20 (vs. LBT of RM34mil in FY19) mainly due to higher PBT from Malaysia and Southeast Asia (SEA) where cost savings was able to offset the 17% decline in total publishing & printing revenue due to aforementioned reasons.
• Malaysia and SEA: Revenue dropped 18% following the implementation of Malaysia’s movement control order (MCO) since 18 March 2020 which impacted sentiments. However, a RM54mil PBT was recorded (vs. RM10mil LBT in the FY19) due to substantial cost savings realized.
• Hong Kong, Taiwan and China: LBT widened to RM23mil in FY20, in tandem with a 13% decline in revenue due to the protests in Hong Kong crippling the retail and tourism sector and the impact of the Covid-19 outbreak.

• North America: LBT narrowed to RM2mil despite revenue declining 20% due to cost-savings and receipt of a grant from the local government.
• Travel: PBT slid 26% as revenue decreased 15% due to travel restrictions and multiple countries imposing lockdowns to contain the spread of Covid-19.
• QoQ: A core loss of RM7mil was recorded in 4QFY20 (vs. core profit of RM15mil in 3QFY20) due to revenue shrinking 32% as both its publishing and travel businesses were impacted by Covid-19.

• FY21 outlook: MCIL predicts an extremely challenging coming year despite the gradual easing of Covid-19 containment measures as consumer demand remains weak and as businesses operating in a tough environment will limit their ad spend further. The group hopes to grow its digital segment market share and revenues as consumers turn to digital platforms in light of the pandemic. Meanwhile, streamlining measures have been taken for its travel segment which will see a negative outlook until a vaccine is found.

• Maintain HOLD on MCIL amid its lacklustre outlook which has been fairly priced in, despite recognizing savings from its cost-optimization initiatives. Its weak outlook is caused by: (i) structural decline in print circulation; (ii) subdued adex outlook as advertisers turn cautious amid the Covid-19 pandemic; and (iii) its travel business being further impacted by travel restrictions to contain the spread of the virus.

Source: AmInvest Research - 25 Jun 2020