Results

• Including the allowance for impai rment loss of interest in associate of RM7.0m, core PATAMI suffered double digit decline of 22% yoy to RM123.4m from RM157.5m. Earnings was within bot h HLIB and consensus’ full year expectations, coming in at 95% and 96%, respectively.

Deviations

• In line.

Dividends

• Declared 1.83 sen/share (4QFY14: 2.19 sen/share). Thus, bringing full year dividend to 3.26 sen/share.

Highlights

• 4Q15 review. Revenue was bel ow bot h ours and streets’ expectations. It was due to lower contribution from publishing and printing operations, overall revenue declined 1% yoy and 13% qoq to RM321.5m. The lower revenue was also caused by the weakening of Malaysian Ringgit as well as Canadian dollar against USD. Note that its 4Q is traditionally a slower quarter for advertising market as adex are usually spent in the Oct-Dec period.

• Greater China: Qoq declined 24% caused by weak local retail market. PBT suffered a loss of RM4m. Apart from lower revenue in general, the loss was due to impairment loss on goodwill.

• Malaysia: Affected by weak consumer and business sentiment from impact of GST resulted in advertisers cutting down their spending. Sales were down 5% qoq and 4% yoy.

• North America: Revenue and PBT declined mainly on the back of slower economy in the region as well as the weakening of Canadian dollar.

• FY15 review. Turnover grew 4% yoy from RM1.53bn to RM1.59bn thanks to Greater China segment which showed 11% increase yoy. Overall PBT on the other hand, fell 21% yoy as it was affected by impairment losses recognised in 4Q15.

• 2015 would be challenging due to softer business envi ronment and lower consumer demand, strained by GST affecting both advertisers and consumers. Nevertheless, management shared that it will remain prudent in its costs management in order to mitigate the challenges faced.

Risks

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

Forecasts

• Unchanged, pending analyst briefing on 29 May 2015. Also introduced our FY17 forecasts.

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 - 29 May 2015