MCIL’s FY17 core net profit of RM91.2m (-32.4% yoy) was largely within our expectations, but above consensus. We remain cautious on MCIL largely due to continued weakness in its print division from uncertainty in the market and poor consumer sentiment. We reaffirm our SELL call with a new TP of RM0.49.

Both Print and Travel Segments Continue to Face Challenges

Media Chinese International Limited (MCIL) posted a lower FY17 net profit by 43.1% yoy to RM67m, on the back of lower revenue by 13.3% to RM1.34bn. The drop in FY17 revenue was due to continued weakness across its print and travel divisions. The print division’s FY17 revenue fell by 12.5% yoy to RM1.03bn due to lower advertising revenue, the sluggish economic environment coupled with weak consumer sentiment, while the travel division’s revenue declined by 16.1% yoy to RM0.31bn. The EBITDA margin was also weaker at 10.5% in FY17 as compared to 13.7% in FY16, mainly attributable to lower contribution from the print division.

FY17 Core Net Profit Down 32.4% to RM91.2m

After adjusting for one-off items (including impairment on goodwill), MCIL’s FY17 core net profit dropped 32.4% yoy to RM91.2m. This came in largely within our expectation but above consensus, accounting for 97% and 108%, respectively, of FY17 forecasts. MCIL announced a second interim DPS of 1.6 sen, bringing total FY17 DPS to 3.05 sen (4.36 sen).

Reaffirm SELL With a New Target Price of RM0.49

We leave our FY18-19E core EPS unchanged as there was no major surprise in the FY17 results and roll out our FY20E forecasts. We remain cautious on MCIL largely due to: 1) weakness in its core print division; 2) potentially cautious ad spend in the Malaysia segment from poor consumer sentiment and uncertainties in the market; 3) potential ad-spend slowdown in the HK/China market as advertisers cut their ad budgets in view of the slow property market and slumping luxury retail sales; 4) negative effect on hard-copy circulation from the continual shift in reader preferences to using mobile devices or the Internet; and 5) fierce competition from other travel operators. We reaffirm our SELL call on MCIL with a new 12-month TP of RM0.49 (from RM0.47), as we roll forward our valuation basis to CY18E (from CY17E), using an unchanged 8x PER

Source: Affin Hwang Research - 30 May 2017