News /  Financial  Impact

• In an announcement to Bursa Malaysia, Media Chinese stated that it is currently in early stages of discussion with a potential buyer to dispose 292.7m shares in One Media Group Limited (One Media). This represents circa 73.01% of issued share capital of One Media.

• A subsidiary of MCIL, One Media provides Chinese language lifestyle publications in Greater China region. Due to impairment loss on goodwill and impai rment loss of interest in associate, One Media recorded a loss for the year ended 31st March 2015 of HKD11.1m (RM6.3m).

• One Media only contributed circa 5% to MCIL’s turnover in FY2015. Furthermore, it is currently operating in strenuous and demanding environment due to slowdown in Greater China’s economy, cautious sentiment and structural shift in media platform. Therefore, we believe the disposal would have immaterial impact to MCIL’s fut ure earnings. We make no changes to our forecast at this juncture pending more information from the company.

• Based on the last transacted price of One Media before suspension (HKD1.22), MCIL’s 73. 01% stake is estimated to worth circa RM260.7m. We expect the disposal proceeds would be used for its diversification into different business segments.

Risks

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

Forecasts

• Maintained.

Rating

• HOLD
• Although we favour MCIL for its prudent cost management and strong cash generative business, weaker Ringgit and Canadian dollar against USD as well as lacklustre adex outlook are dampener for the stock. Maintain HOLD.

Valuation

• Maintain TP at RM0.64 based on unchanged P/E multiple of 8x based on 1 SD below average mean. Valuation is justified in our vi ew, due to MCIL’s smaller market capit alisation compared to peers and low liquidity.

Source: Hong Leong Investment Bank Research - 13 Jan 2016