Investment Highlights

• Maintain HOLD on Media Chinese International Ltd (MCIL) with unchanged forecasts and fair value of RM0.16/share, pegged to a PB of 0.4x and net asset per share of 39 sen.
• MCiL’s 2QFY21 results were within expectations, following the group’s profit warning issued on 8 November 2020. The group posted a core profit of RM3mil, which brings 1HFY21 core loss to RM20mil. This compares against our and consensus’ full-year FY21F core loss forecasts of RM35mil and RM30mil respectively. We maintain our forecasts as we expect gradual adex recovery in quarters ahead although adex will still be weak as we remain cautious of the impact of the conditional movement control order (CMCO) on sentiments.
• YoY: 1HFY21 fell into the red vs. a RM23mil core profit seen in 1HFY20 largely due to revenue plunging 62% as a result of Covid-19. Its travel segment revenues were nearly wiped out (- 99.9%) as travel-related activities came to a halt amid restrictions and border closures enforced globally to curb the spread of the virus. Meanwhile, the turnover for the group’s publishing & printing dove 36% after advertisers turned cautious and print circulation declined in its key markets i.e. Malaysia & Southeast Asia, Hong Kong & Taiwan, and North America.
• As both the MYR and CAD weakened against USD, MCIL’s 1HFY21 saw negative impact of RM3.3mil on revenue and RM0.7mil positive impact to LBT.
• QoQ: 2QFY21 returned to the black with a RM3mil core profit vs. a RM24mil core loss in 1QFY20 due to: (i) revenue recovering by 25% mainly on the improved performance for the publishing & printing segment following the gradual easing of Covid-19 restrictions; (ii) strict cost control management across its three key segments; (iii) subsidies and government relief programmes for its Hong Kong & Taiwan, and North America segments. MCIL received wage subsidies under the Hong Kong government’s Employment Support Scheme and funds from the Canadian government’s subsidies and relief programmes.
• Outlook: MCIL expects challenging times ahead, particularly for its travel segment, which is only expected to recover if an effective vaccine is widely available and customers’ confidence in travelling is restored. Following the pandemic, MCIL has seen an increase in online consumption and digital business opportunities and thus, will continue to focus on expanding digital revenues. The group will also continue its strict cost controls which we view will continue to partially offset its bleak performance amid the tough operating environment.

Source: AmInvest Research - 26 Nov 2020