Period     1QFY13/1QCY13

Actual vs. Expectations      The 1QFY13 net profit of RM27.1m made up c.13% and c.12% of ours and the consensus full year estimates respectively. We deem the results to be within expectations as 1Q typically is the weakest quarter amid the seasonal weakness (it made up only c.10-c.17% of the full-year net profit for each of the past three years).

Dividends      No dividend was declared for the quarter under review.

Key Result Highlights      YoY, the 1QFY13 net revenue increased by 9% to RM365.8m driven by all the segments with the TV and Print segments as the main contributors. Notably, the decent growth could also be attributed to the rebound from the low base in 1QFY12 (the onset of the Euro debt crisis hurt the adex sentiment substantially then). At the group’s EBIT level, it soared by 32% to RM43.3m mainly on the back of a higher interest income coupled with a lower depreciation.

QoQ, the 1QFY13 net revenue decreased by 23.0% to RM365m with lower revenues seen across all the segments (save for outdoor) amid the seasonal weakness. The group’s net profit plunged by 63%, dragged down by a lower EBIT margin of 11.9% (or -9.4 percentage points) on the back of a lower revenue and an unchanged fixed direct cost.

Outlook      As concerns over the general election fade, we believe that there could be a short term boost in adex mainly by the election boom and traditional advertisers seeking to catch up on the spending that they have withheld since early of this year.

Nonetheless, we are keeping our conservative view unchanged (with an annual 8% YoY growth in adex) in light of the upcoming subsidy rationalisation plan that could have a negative impact on adex sentiment.

Change to Forecasts     Post-results, our FY13 and FY14 net profits have been lowered by -5% and -2% respectively after taking into account of higher (i) discount rate (from 68% to c.69 in FY13 and FY14) and (ii) royalties (from 19% to c.21% in FY13 and FY14) assumptions in the TV segment coupled with higher direct cost at the group level.

Rating      Maintain MARKET PERFORM

Valuation      Our TP has been increased to RM2.72 (from 2.31 previously) as we rolled forward our 12-month TP valuation from 13.4x FY13 EPS to 16.0x FY14 EPS (being the +0.5SD above the 6-year average forward PER to account for a more positive sector sentiment post the GE).

Risks      CY13 gross adex growth coming in below our CY13 adex estimate of RM12.4b (+8% YoY).

Source: Kenanga