Period  2Q13/1H13

Actual vs. Expectations  The group reported a 2Q13 net profit (NP) of RM60.1m (+122% QoQ, +6% YoY), bringing its 1H13 NP to RM87.2m (12% YoY). The results came in within expectations, making up c.45% and c.40% of ours and the consensus full year estimates respectively as 1H typically only made up c.38%-c.45% of the full-year net profit for each of the past three years.

Dividends  As expected, an interim single tier dividend of 3.0sen was declared under the quarter review.

Key Result Highlights  YoY, 1H13 net revenue increased by 6% to RM830.3m driven by the TV and Print segments as the main contributors. Delving deeper, this was mainly helped by the group’s efforts of bringing in non-traditional advertisers to compensate for the shortfall prior to the GE period (recall that most of the advertisers pullback their adspend in view of the GE uncertainty.) The decent growth could also be attributed to the base effect on recovery from contractions experienced in 1H12 (the onset of the Euro debt crisis that hurt the adex sentiment substantially back then). At the group’s EBIT level, it surged by 9% to RM129.3m mainly on the back of a higher interest income (additional RM3.2m YoY).

 QoQ, the 2Q13 net revenue surged by 27.0% to RM465.2m with higher revenues seen across all the segments riding on the seasonality strength as well as the short-term adspend boost post GE (to catch up on the spending that they have withheld since early of this year). Meanwhile, the group’s PBT surged by >100% driven by the strong recovery in TV segment (+98%) from the contractions in the 1Q, thus leading to better operational efficiency.

Outlook  Management is now cautiously optimistic (from optimistic previously) in view of the recent economic uncertainty that could dampen the adex sentiment.

 On our take, we are still keeping our conservative view unchanged (with an annual 17.5% 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 1.9% and 2.2% respectively after we revised our FY13-FY14 average USD/MYR currency forecasts to RM3.11 and RM3.09 respectively (from RM3.05 and RM3.01 previously) to align with our latest in-house economics team’s estimate.

Rating   Maintain MARKET PERFORM

Valuation  Our TP has been lowered to RM2.60 (from RM2.65 previously) based on an unchanged targeted FY14 PER of 16.3x (being the +0.5SD above the 6-year average forward PER).

Risks  The CY13 gross adex growth coming in below our expectation of RM13.4b (+17.5% YoY) or RM8.6b (+2.1%) after stripping-off the Pay-TV segment contribution.

Source: Kenanga