Investment Highlights

• We maintain our HOLD recommendation on Media Chinese International Ltd (MCIL) but raise our fair value to RM0.19/share, pegged to a higher PB of 0.5x due to better cost savings and gradual recovery in its publishing and printing segment (previously RM0.16/share, PB of 0.4x). We make no changes to share price, which reflects a 3-star ESG rating as appraised by us (Exhibit 6).

• We project a narrower loss in FY21F as per the group’s profit guidance, and a slightly smaller loss in FY22F and higher profit forecast in FY23F to account for better cost savings across the group’s businesses.

• The group issued a profit warning for 4QFY21F, expecting to record a core profit of US$1.7mil (approx. RM7.0mil) vs. 4QFY20’s loss of US$1.8mil (approx. RM7.4mil) which was mainly attributable to the better performance of its Hong Kong segment as business conditions improved as well as cost savings across all of the group’s business operations.

• For FY21F, MCIL expects to record a loss not exceeding US$2.0mil (approx. RM8.2mil) vs. a profit of US$7.1mil (approx. RM29.2mil) in the previous year. This is mainly due the impact of the Covid-19 pandemic on the group’s publishing & printing segment across its markets in Malaysia & Southeast Asia (SEA), Hong Kong & Taiwan, and North America due to weakened economic conditions; and its travel business due to Covid-19 global restrictions.

• The profit warning for FY21F was narrower than our forecast of RM20.7mil core loss and consensus’ forecast estimates of RM31.0mil core loss for the year. The variation is due to better than-expected 4QFY21 performance for its Hong Kong segment as business confidence recovered (Exhibit 2) as it was able to contain daily incidence of Covid-19 cases to an average of below ~10 per day for a bigger portion of the quarter i.e. from early October 2020 till mid-November 2020 before experiencing another wave of Covid-19 cases thereafter (Exhibit 3).

• We remain cautious on MCIL’s performance, particularly for the group’s publishing & print segment in Malaysia & SEA although its travel business could improve in FY23 on a gradual recovery as more countries embark on Covid-19 vaccination programmes. However, we are closely monitoring developments relating to the travel sector as there have been concerns with more variants of Covid-19 emerging which might delay international travel. MCIL will continue with its cost optimization initiatives and focus on monetization of its digital assets.

Source: AmInvest Research - 12 May 2021