MEDIA’s risk-reward profile is increasingly attractive after sliding 71% from a 52-week high of RM0.52 to RM0.15. Valuations are attractive as the stock is trading at deep discounts of 72% to BVPS of RM0.54 (-33% to peers) and 34% to netcash per share (NCPS) of RM0.227 (-34% to peers), respectively. Moreover, current share price is considerably lower against major shareholders i.e. Syed Mokhtar (bought 31.9% stake on 8 Oct 2019) and Morgan Stanley (12.8% stake accumulated since Apr 2017) entry costs. In wake of tapering selling pressures after EPF ceased to be a substantial shareholder on 23 Apr, MEDIA is expected to challenge higher resistances at RM0.17-0.22 in the mid to long term, following a bullish downtrend line breakout on 17 Apr.

Digital platforms and better cost control to cushion COVID-19 impact. While the MCO extension to contain the COVID-19 outbreak will weigh on an already weakening traditional adex such as print, radio, and TV, it might benefit digital adex with more online marketing and promotions. Hence, MEDIA is expected to accelerate its efforts to increase the contribution from the digital segment from both online and offline platforms to cushion the falling revenue. Overall, we take comfort that management is taking various measures to unlock the value of its existing assets through digital innovation and commerce-oriented strategies on top of cost rationalization exercises to narrow losses.

Share price now is considerably lower against major shareholders' entry price. According to the Bursa announcement, Syed Mokhtar acquired a 31.9% stake in MEDIA on 8 Oct 2019 (Oct H/L: RM0.485/0.365) via Direct Business Transaction (DBT). Meanwhile, its 2nd largest shareholder, Morgan Stanley also accumulated about 12.8% stake since Apr 2017.

Excessive discount to assets value. The stock is currently trading at a cheap valuation of 0.28x of price/book value (P/B) with its current market capitalization of RM166m is 34% lower than its net cash of RM252m. While MEDIA's business outlook remains clouded by the industry’s structural and cyclical shifts, its share price has fallen by 46% YTD (steeper than peers). At these levels, we believe the company’s share price is overly discounted, implies that investors are getting its other assets such as property and printing plant for free.

Bullish downtrend line breakout. After plummeting 79% from a 52-week high of RM0.52 (8 Aug 2019) to a low of RM0.11 (17 Mar), MEDIA has been firming up to stage a bullish downtrend line breakout on 17 Apr before ending at RM0.15 yesterday. Following the cessation of EPF as a substantial shareholder on 23 Apr and the remaining 40m outstanding shares could have been exhausted by now, MEDIA is expected to break the immediate resistance at RM0.17 (23 Apr high) soon. Breaking this hurdle will spur prices towards RM0.20 psychological barrier and our LT target at RM0.22 (50% FR). Supports are pegged at RM0.135 (30D SMA) and RM0.12 (lower BB). Cut loss at RM0.115.

Source: Hong Leong Investment Bank Research - 29 Apr 2020