Period  4Q13/FY13

Actual vs. Expectations Within expectations. The group reported a 4Q13 net profit (NP) of RM63.4m (+0% QoQ, -13% YoY), bringing its FY13 NP to RM214m (+2% YoY), which made up c.104% and c.100% of ours and the consensus full-year estimates, respectively.

Dividends  Above expectations. A third interim single tier dividend of 3.0 sen and a final single tier dividend of 5.0sen (totalling to 8 sen DPS vs. 7.0 sen in FY12 and our previous FY13 assumption of 7.0 sen) were declared for the quarter under review. All in, YTD DPS of 14.0 sen represented c.75% of dividend payout ratio which also implies 5.4% net dividend yield.

Key Result Highlights YoY, FY13 net revenue came in flat at RM1720.1m (+2%) as the growth in lion share revenue contributors; namely, TV (+2%) and Outdoor (+4%) segments, was erased by the weak Print segment (-3% which was due to lower advertising and newspaper sales). Of noteworthy, the revenue of the group’s Radio segment (+16%) outperformed the overall industry revenue growth of 4% on the back of higher sponsorship by advertisers as well as adspend from Non Traditional Advertisers. As a result of the flat revenue growth, the group’s NP merely grew by 2% to RM214.2m.

 QoQ, the group registered a muted 4Q13 with pedestrian growth seen at the net revenue level (+3%) and its NP level (0%). Typically, 4Q13 is a seasonally strong quarter where advertisers fully utilised their annual budgets concurrently with the year-end campaign as well as the festive season factor. With the exceptionally weak quarter seen this time around, we reckon that this could be a reflection of cautious adspend by the advertisers amidst the subsidy rationalisation plans.

Outlook  While we reckon that the two major adex friendly events namely FIFA World Cup and Visit Malaysia Year could

lend strength to the consumer sentiment, we are still keeping our conservative view unchanged (with an annual 6.8% YoY growth in adex) in light of the subsidy rationalisation plans that could dampen the adex sentiment.

 Note that the group has now raised its dividend payout ratio (DPR) policy from a wide 25%-75% range to a narrower 60%-80% range. We are keeping our FY14 DPR assumption of 78% for now in view of the bleak adex outlook.

Change to Forecasts Our FY14 NP has been marginally increased by 2% for house keeping purposes post 4Q13 results as well as full-year results update. We have also introduced our FY15 earnings estimates where we are expecting NP to achieve RM215m (+7.5% YoY growth).

Rating Maintain UNDERPERFORM

Valuation  Our TP has been marginally raised to RM2.66 (from RM2.64 previously) based on a targeted FY14 PER of 16.1x (being the +0.5SD above the 6-year average forward PER).

Risks to our call The CY14 gross adex growth coming in above our expectation of RM14.5b (+6.8% YoY) or RM8.9b (+2.1%) after stripping-off the Pay-TV segment contribution.

Source: Kenanga