Investment Highlights

• We maintain HOLD on Media Chinese International Ltd (MCIL) with unchanged fair value of RM0.16/share, pegged to a PB of 0.4x.

• We project wider losses for FY21F as we expect a weaker 4QFY21 while projecting narrower losses in FY22F and higher profit in FY23F due to expectations that Covid-19 vaccines will gradually lead to a recovery in MCIL’s travel segment.

• MCIL’s results were beneath expectations, recording a core profit of RM6mil in 3QFY21, which brings 9MFY21 core loss to RM14mil. This compares against our and consensus’ full-year FY21F core loss forecasts of RM12mil and RM14mil respectively.

• YoY: 9MFY21 fell into the red vs. a RM36mil core profit seen in the previous year as overall group revenue plunged 57% due to the impact on both its travel, and publishing & printing segments as result of Covid-19 related travel restrictions and enforced lockdowns. These had impacted advertisers’ adspend across the group’s key markets.

• Turnover in Malaysia & Southeast Asia (SEA), Hong Kong & Taiwan, and North America dropped by 36%, 23% and 41% YoY respectively while revenue for its travel segment was nearly wiped out in 9MFY21. However, the group received wage subsidies from the Hong Kong government, and a grant and wage subsidies from the Canadian government, which helped to offset the PBT declines in both segments. As both the MYR and CAD weakened against the USD, MCIL’s 9MFY21 saw a negative currency impact of RM2mil on revenue and a RM0.8mil positive impact on PBT.

• QoQ: 3QFY21 profit rose 77% (low base effect) in line with a 4% increase in turnover, mainly due to the improvement in the Malaysia & SEA segments as economic conditions improved following the easing of the movement control order (MCO) for the quarter.

• 4Q outlook: MCIL expects a challenging quarter ahead across all its markets, with the quarter being a traditionally slower season for the group’s publishing segment. For the past 3 years, 4Q accounts for 16–22% of full-year revenue. Meanwhile, improvement in the travel sector is expected to begin in 2HCY21 as certain countries have started to embark on Covid-19 vaccination programmes. Despite this, the group will continue to keep its costs controlled whilst also focusing on the monetization of its digital assets.

Source: AmInvest Research - 26 Feb 2021