The  Financial  Daily  reported  that  Media  Chinese  (MCIL)  may  undertake  a  capital repayment  programme  that  it  may  see  its  shareholders  being  rewarded  with  a  bumper dividend of 40 sen per share, which works out to a sum of RM680m.

Trading  in  the  stock  suspended.  Trading  in  MCIL  shares  was  suspended  in  the afternoon session last Friday but there was no announcement in relation to it. The stock will continue to be suspended today pending a material announcement by the company.

Bonanza  for shareholders  highly  likely.  As  reported  by  the  daily,  we  do  believe that the  company  is  highly  likely  to  announce  some  form  of  capital  repayment.  However, going by  its  huge  cash  pile  of RM412.6m  or  24  sen  per  share  as  of  end  Mar  2012,  we think RM0.40 per share of capital repayment is excessive. If it pays out this amount, the entire sum will come up to  RM680m, meaning that the group will need to borrow to do the capital repayment, which we believe is unlikely. 

A  windfall  indeed  albeit  a  smaller one.  Pending  the  material  announcement,  we  are maintaining MCIL as our top pick in the Media sector, as well as our BUY call and FV of RM1.60,  based  on  a  13x  FY13  PER.  MCIL  has  always  been  our  favorite  owing  to  its management's prudent  cost  control  measures  and  the  healthy  adex  growth  in  the Chinese newspaper segment. Besides, MCIL has never failed to pay lucrative dividends to  its  shareholders.  For  its  FY12  ended  31  March,  the  company  paid  an  8.1  sen dividend, which translated into a dividend yield of 7% based on a payout ratio of 72%. 

Source: OSK