Results

• Within expectations: Media Chinese’s 9MFY17 revenue of RM1,077.6m was translated into earnings of RM64.3m, accounting for 71.8% of HLIB’s full year estimate but slightly below streets’ full year estimate (67.9%).

Deviation

• None.

Dividend

• None.

Highlights

• QoQ: 3QFY17 revenue and PBT fell 9% and 4%, respectively. This is mainly attributed to a decline in its travel segment where its revenue fell 9% and PBT turned to the red at RM0.8m (PBT of RM6.2m in 2QFY17) as 2Q is a seasonally stronger quarter for the segment.
• YoY: 3QFY17 turnover fell 7% as the group was hit by the effects of poor consumer sentiment and decline in tourists visiting Europe resulting in a drop of 38% in PBT.
• YTD: 9MFY17 turnover dropped 10% as revenue from all segments declined mainly due to weak consumer sentiment. (Malaysia -8%, Greater China -9%, North America -5% and Travel -15%). PBT fell 36% as its Greater China and North America operations remained in the red and its travel segment took a hit, falling 56% due to intensified competition in the market and decline in demand for European tours amid security concerns.
• Moving forward we expect the group to experience more challenges due to soft adex expectations, slowdown in Greater China economy and continued decline in tourism industry in Europe.

Risks

• (1) Weak Adex growth; (2) High newsprint cost; (3) Threat of new players; (4) Shift to digital news; (5) Decline in tourism industry; (6) Depreciation of RM vs. US$; and (7) Regulatory risk.

Forecasts

• Unchanged.

Rating

HOLD (↔)

• Although we favour MCIL for its prudent cost management and strong cash generative business, we believe that adex will remain soft and gloomy mainly caused by the macro headwinds and poor consumer sentiments.

Valuation

• We maintain HOLD call with unchanged TP of RM0.61 based on unchanged P/E multiple of 9.5x (1SD below average mean).

Source: Hong Leong Investment Bank Research - 28 Feb 2017