Results

• In line – Media Chinese 9MFY15 revenue of RM1,197.0m (- 1% yoy) translated into PATAMI of RM101.2 (-21% yoy), came in within both HLIB and consensus’ full year estimates, accounting for 73% and 78% respectively.

Deviations

• None. 3Q traditionally has been the strongest quarter.

Dividends

• None. Dividends usually declared in 2Q and 4Q.

Highlights

• 9MFY15… YTD revenue fell slightly by 1% from RM1,209.0m to RM1,1970m YoY. All divisions except for Greater China experienced contraction in revenue.

• Greater China: Thanks to the recovery in Hong Kong’s property market in the previous quarter, the overall Hong Kong and mainland China division achieved revenue growth of 5% YoY. MCIL recorded lower PBT (-20% YoY) caused by lower turnover from publishing and printing segment, which was partly offset by its lower operating expenses.

• Malaysia: The weak consumer sentiment as well as unfavourable market condition in Malaysia caused advertisers to reduce their spending. This resulted in lower revenue (-4% YoY) for the Malaysian operations.

• North America: Revenue and PBT fell primarily on the back of unfavourable currency conditions.

• 3QFY15… Revenue was in line with our expectations. MCIL managed to keep its costs well controlled, resulting in 16% growth in its operating profit QoQ.

• For MCIL, most of the USD exposure lies in their newsprint costs. US$ is the functional currency for MCIL. Malaysian operation contributed circa 85% of the group’s profit, the weakening ringgit will translate into lower profit on MCIL’s account. However, the lower newsprint prices should be able to mitigate the lower profit for the group.

• 2015 would be challenging due to softer business environment and lower consumer demand, strained by GST. Nevertheless, we believe it should be manageable for MCIL as its efficient cost cutting initiatives would be able to mitigate its lower revenue moving forward.

Risks

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

Forecasts

• Unchanged.

Rating

HOLD

Although we favour MCIL for its prudent cost management 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

• Maintain TP at RM0.64 based on unchanged P/E multiple of 11x (historical average) CY15 earnings.

Source: Hong Leong Investment Bank Research - 27 Feb 2015