Results

• Below expectations – MCIL’s FY16 turnover of RM1362.3m was translated into a core PATAMI of RM104.0m (declined 28% yoy), accounting for 83% and 80% of HLIB and consensus full year estimation, respectively.

Deviations

• Lower than expected contribution from all of its division.

Dividends

• Declared second interim dividend of 2.43 sen/share (4QFY15: 1.83 sen/share), bringing the full year dividend to 4.36 sen/share. This translates to dividend yield of circa 6.0% based on current share price. Ex-date: 20th June 2016; Pay-date: 13th July 2016.

Highlights

• FY16 review. MCIL recorded negative growth for all of its operations in terms of both revenue and PBT. The lower contribution was mainly due to slower market condition in all its home market – Malaysia (-21% yoy), China (-8% yoy), and North America (-14% yoy), structural shi ft to digital media as well as weakening currency. The group’s PATAMI declined 11% yoy, but slightly offset by lower newsprint costs and MCIL’s known efficient cost management.

• Malaysia: Cont ributing circa 53% to the group’s topli ne, Malaysian segment showed a decline in revenue as well as PBT, falling 21% and 14%, respectively.

• Greater China: Due to lower demand from the retail market, sales declined 8% yoy to RM237.4m. Its PBT on the other hand, fell in the red, recording a loss of RM7.1m. Another reason for the decline was due to One Media Group that was hit by declining magazine advertising.

• North America: Recorded a loss of RM3.9m attributed to slow economic growth and weak Canadian Dollar. Its travel and services segment turnover marginally increased by circa 1%. We expect a slowdown in quarters ahead due to heightened terrorist threat globally.

Risks

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

Forecasts

• Unchanged pending analyst briefing in the morning.

Rating

• Under Review

• Although we favour MCIL for its prudent cost management and 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.

Valuation

• Our TRADING BUY call and TP of RM0.67 are under review pending analyst briefing. TP is based on unchanged P/E multiple of 8x 1SD below average mean.

Source: Hong Leong Investment Bank Research - 31 May 2016