We maintain HOLD on Media Chinese International Ltd (MCIL) with unchanged forecasts and fair value of RM0.19/share, pegged to a PB of 0.5x. We make no changes to share price to reflect a 3-star ESG rating as appraised by us (Exhibit 3).
Key updates from MCIL’s 4QFY21 conference call:
FY21 recap: FY21 recorded a core loss of RM3mil (vs. FY20’s core profit) as revenue dove sharply by 52% mainly due to the severe Covid-19 disruption which impacted both the performance of the group’s travel and publishing & printing segments across all its key markets. However, MCIL said that digitalization has been accelerated by the pandemic, especially in Malaysia. Overall, the biggest drop in revenue for the group’s key markets came from decline in newspaper adex.
Positioning for recovery: There has been progressive pick-up in Hong Kong activities and the recovery is expected to continue albeit having short-term macro uncertainties. Meanwhile, the Malaysian market is expected to recover in 2HCY21 as vaccine rollouts are expected to reduce Covid-19 cases and further lockdowns. As for the travel segment, MCIL anticipates international travel to resume at a slower pace in 2HFY22 (October 2021 onwards) with expectations of the introduction of “vaccine passports”. The group will continue to optimize its print business and cost-rationalization efforts, whilst driving growth in digital revenues as it develops audiences in new platforms and builds up its digital video content business. As at FY21, MCIL’s group digital advertising revenue constituted 28% of its print advertising revenue.
Strategic updates: For its Malaysia segment, the group is looking to grow its digital subscribers by: (i) continuing its membership drive such as with Sin Chew Online; and (ii) working closely with advertisers to promote engagement as it positions itself as a one-stop-solution for advertisers offering multi-channel bundled offerings i.e. print, digital, and events. For its Hong-Kong segment, MCIL will: (i) focus on educational offerings as the government spending on the education sector increases; (ii) be seeing more growth potential coming from China and the Greater Bay Area as well as Hong Kong’s position as an international financial hub; and (iii) continue to grow its digital business opportunities as it embarks on various revenue generation strategies.
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