Period  1QFY14

Actual vs. Expectations  Media Chinese’s (“MEDIAC”) 1Q14 net profit of USD13.3m (or RM42.1m) came in within expectation and accounted for 23.8% and 22.8% of ours and the street’s FY14 full-year estimates.

Dividends  No dividend was declared as expected given the group typically rewards its shareholders semi annually. The group has a dividend policy of distributing 30%-60% of PAT.

 For the full financial year, we expect the group to distribute 1.7 U.S. cents (or RM5.1 sen) dividend, translated into 5.0% dividend yield.

Key Result Highlights  YoY, MEDIAC’s 1Q14 revenue was improved by 3% to RM399.2m, thanks to the higher contribution from (i) publishing business in Malaysia that led by electionrelated advertisements; and (ii) the tour segment that driven by higher long-haul tour demand. Its PBT, meanwhile, was lower by -9% to RM59.7m due mainly to the higher finance costs. The net profit, however, was reduced by 13% to RM42.1m, no thanks to the higher loses in its associates level as well as a higher effective tax rate of 28.2% (vs. 24.4% a year ago).

 QoQ, the revenue was advanced by 15% on the back of higher turnover from all its operating segments, notably the tour segment. The group’s PBT, meanwhile, was increased at a lower pace by 3% due to the taller distribution and administration costs recorded in contrast to the immediate preceding quarter.

Outlook  Management expect its business environment to remain challenging in the coming quarters due to the slowing economy and increased competition in its core markets.

 Newsprint price is expected to remain stable. However, the continued weakening in RM (against USD) may dampen the group’s profitability.

Change to Forecasts  Lowered our administration cost assumption by 50 bps to 8.0% (of the turnover) to reflect the latest spending trend.

 Revised our FY14-FY15 average USD/RM currency forecasts to RM3.11 and RM3.09 (from RM3.04 and RM3.01 previously) to align with our latest in-house economic team’s estimate.

 All in all, our FY14-FY15 earnings have been lowered to RM170m and RM164m, respectively.

Rating   Maintained MARKET PERFORM

Valuation  Lowered our MEDIAC’s TP to RM1.19 (from RM1.21 previously) based on an unchanged targeted FY14 PER of 12.0x (+0.5x SD).

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

Source: Kenanga