Results

• Below expectations – MCIL’s 1HFY15 turnover of RM777.9m (- 5% yoy) translated into PATAMI of RM60.1m (-27% yoy) came in below ours and the streets’ full year estimates, accounting for 43% and 41% respectively.

Deviations

• Lower-than- expected turnover from all divisions except for Greater China.

Dividends

• Declared a net dividend of 1.44 sen/share, lower than previous corresponding quarter of 2.42 sen/share. Ex -date on 15 December 2014, payment on 15 January 2015.

Highlights

1HFY15… YTD revenue suffered a contraction of 5% from RM820.7m to RM777.9m. This was mainly owing to the drop in all its division, except for Greater China, which improved 2% yoy, backed by the improvement in China’s property market. Malaysia’s division continues to be hit by weak consumer demand, strained by government subsidy rationalisation, GST and a more fragile business environment. Its North America segment also c harted a drop of 9% yoy coming from the weakening Canadian dollar.

QoQ… Sales increased 8% qoq, mainly contributed by the travelling s egment as it experiences seasonal strength during summer holiday season. Meanwhile, MCIL’s expenses remained well controlled, declined by 1% qoq. This resulted in PBT increasing 13% qoq.

Although we expect MYR to remain weak against the USD throughout 2015 due to lack of mac ro support, we believe the downtrend of the newsprint prices will be able to neutralize the impact of weakening RM.

Notably, MCIL launched its LOGON e-commerc e and POCKETIMES video channels today (26 Nov 2014).

Risks

• Weak Adex growth;
• High newsprint cost;
• Threat of new players;
• Depreciation of RM vs. US$; and
• Regulatory risk.

Forecasts

• As we assumed a slower adex growth and weak business environment, as well as MCIL’s lower than expected sales from most of its business segments, we cut our FY15 and FY16 forecasts by 5-7%.

Rating

HOLD

• Although we favour MCIL for its prudent cost manage ment, pretty decent yield of 5.5- 5.8% and its strong cash generative business, we believe that adex will be unexciting and gloomy mainly caused by the short term macro headwinds and poor consumer sentiments. Maintain HOLD.

Valuation

• TP slashed by 5% to RM0.88 from RM0.93 based on unchanged P/E multiple of 11x CY15 earnings.

Source: Hong Leong Investment Bank Research - 27 Nov 2014