Period  3Q13/9M13

Actual vs. Expectations  Within expectations. The group reported 3Q13 net profit (NP) of RM63.5m (+6% QoQ, +8% YoY), bringing its 9M13 NP to RM150.7m (11% YoY), which made up c.78% and c.70% of our and the consensus full year estimates, respectively.

Dividends  As expected, a second interim single tier dividend of 3.0 sen was declared (YTD: 6.0 sen). We are expecting another single tier dividend of 7.0 sen in the 4Q13, totalling to 13.0 sen DPS, which implies a c.5% of net dividend yield.

Key Result Highlights  YoY, 9M13 net revenue increased by 4% to RM1268.4m mainly led by the growth in TV (+5%) and Radio (+22%) segments. On a closer look, the healthy growth in TV segment was mainly helped by the group’s efforts in bringing in non-traditional advertisers (NTA) to compensate for the shortfall prior to the GE period (recall that most of the advertisers pulled back their adspend in view of the GE uncertainty) while the robust growth in Radio segment was mainly helped by higher sponsorship by the advertisers as well as adspend from NTAs. With stringent cost management in place, segmental PBT (before associate) surged by 11% with growth seen in all segments (save for Print segment, which was dragged down by additional investment cost in new market to sustain its readership).

 QoQ, the 3Q13 net revenue came in lower by 6% to RM438.2m due to the high base in 2Q13 (recall that 2Q13 was boosted by short-term adspend boom during the GE period). Nonetheless, the group’s segmental PBT (before associate) increase by 19%, mainly lifted by TV and Radio segments while operational costs were tightly controlled.

Outlook  While the momentum is still positive according to the management, we are keeping our conservative view unchanged (with an annual 17.5% YoY growth in adex) in light of the subsidies rationalisation plan that could have a negative impact on adex sentiment.

Change to Forecasts   Post-results, our FY13/FY14 NPs have been increased by 4.7%/1.0% following a higher EBIT margin of 16.8%/15.5% (from 16.0%/15.3%) to account for lower direct and overhead costs.

Rating    Maintain UNDERPERFORM

Valuation  Our TP has been raised to RM2.64 (from RM2.60 previously) based on an unchanged targeted FY14 PER of 16.3x (being the +0.5SD above the 6-year average forward PER).

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

Source: Kenanga