Media Chinese’s 1HFY19 revenue of RM693.7m translated into a stronger-than expected core PATAMI of RM27.3m (+11% YoY). Revenue was lifted by improvement from travel segment due to incentive and World Cup tours but partly dragged by print segment. We cease coverage on Media Chinese as we do not foresee any catalyst in the near-term amid dwindling print adex and the challenging environment in the sector. Our previous HOLD rating with a TP of RM0.23 should no longer be valid.

Above expectations. Media Chinese’s 1HFY19 revenue of RM693.7m translated into a core PATAMI of RM27.3m (+11% YoY), accounting for 61% and 65% of HLIB and streets’ full year estimates, respectively. The upward surprise was due to higher-than expected margin from travel segment.

Dividend. The group declared dividend per share of 0.75 sen, going ex on 12 December 2018.

QoQ. 2QFY19 revenue increased by 4.4% lifted by the travel segment (+17.1%) but was however dragged by the print segment (-3.2%) due to weaker print circulation and print adex. Core earnings improved by 2.5% to RM13.8m thanks to travel segment’s improvement.

YoY. 2QFY19 revenue increased by 7.3% attributable to improvement from travel segment due to increase in Russian tours coinciding with World Cup. However, core earnings declined by 7.1% as improvement in travel segment was dragged by high operating cost from print segment.

YTD. 1HFY19 revenue improved by 9.9% thanks to growth in travel segment (+32.5%) due to incentive and FIFA World Cup tours. Subsequently, core earnings also improved by 11% thanks to higher-margin tours, which lifted the segment’s margin by 2.2 ppts.

Outlook. We remain pessimistic on the group’s core media business, as the rapid adex migration to the digital platform away from traditional platform is faster than the group’s initiatives on new digital product. Besides that, we opine that the group has less to offer as compared to its peers, as Media Chinese is transforming slower than its local and foreign peers.

Cease coverage. We do not foresee any catalyst on this counter in the near-term due to dwindling adex on print media and the challenging environment in the sector. Therefore, we discontinue our coverage on Media Chinese.

Our previous forecast, HOLD recommendation and TP of RM0.23 based on P/E multiple of 9.5x pegged to FY20 EPS should no longer be valid.

Source: Hong Leong Investment Bank Research - 30 Nov 2018