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.

• We cut our FY21F–FY23F forecasts to account for wider losses due to slower-than-expected recovery from Covid-19’s impact on profitability for both of MCIL’s segments whilst expecting earnings decline to be cushioned by cost-savings and government aid. We also anticipate that the group to continue not paying dividends to conserve cash.

• MCIL’s poor 1QFY21 results were expected following the group’s profit warning, recording a core loss of RM23mil after excluding an exceptional loss of RM1mil from amortization of intangible assets.

• YoY: 1QFY21 wider core loss was due to revenue diving 66% brought about by the negative impact of Covid-19 on both MCIL’s publishing & printing segment and travel segment which were severely impacted by global lockdowns and strict travel restrictions as well as weaker advertising revenues seen across its markets i.e. Malaysia and Southeast Asia; Hong Kong & Taiwan; and North America.

• 1QFY20 saw negative currency impacts as the MYR and CAD weakened against the USD, causing the group’s turnover to decline by RM2.7mil and a positive impact of RM0.7mil respectively on the group’s LBT.

• YoY segmental analysis:

o Publishing & printing:

• Malaysia & Southeast Asia: Revenue dropped by 48%, leading the segment to sink into losses due to Covid-19 restrictions impacting ad spend and delivery of publications which led to decline in circulation revenue.

• Hong Kong & Taiwan: LBT widened as revenue decreased by 27% with the pandemic leading to adverse impact on local economic activities which subsequently affected adex.

• North America: Revenue slumped 56% amid the challenging operating environment but cost savings and the Canadian government’s relief measures helped lower operating costs.

o Travel: Revenue plummeted significantly due to lockdown measures and travel restrictions. However, the negative impact was cushioned by cost-cutting measures and government relief subsidies.

• We maintain HOLD on MCIL as its lacklustre outlook amid a challenging operating environment that is worsened by Covid-19 for both its key segments, have been priced in.

Source: AmInvest Research - 1 Sept 2020