Period  3Q14/9M14

Actual vs. Expectations Media Chinese Int’l (MEDIAC)’s 9M14 net profit of USD39.3m (or RM128.7m) came in within expectations, accounting for 73.3% and 75.4% of our forecast and the street’s FY14 full-year estimates, respectively.

Dividends  As expected, no dividend was declared during the quarter.

Key Result Highlights YoY, the 9M14 revenue was relatively flat at RM1.21b. The strong tour segment (+136% yoY to RM15.6m) was offset by the lower performance in the publishing and printing segment. The group’s PBT, meanwhile, dropped 6% to RM182m due mainly to higher finance costs. Net profit was reduced by 9% to RM129m, no thanks to the higher losses at its associate level as well as a higher effective tax rate of 27.4% (vs. 24.7% a year ago).

 QoQ, the revenue was slid by 6% to RM384m a result of the lower tour segment’s revenue, although its publishing and printing segment recorded a strong 9% jump in revenue.

 During the quarter, the ongoing weakening of RM and Canadian Dollar against USD resulted in a negative currency impact on the group’s turnover and PBT of USD4m and USD0.9m, respectively.

 The group’s Malaysia publishing and printing segment revenue improved by 3.5% QoQ to RM234m in 3Q14.

The low single digit growth was mainly due to the adverse impact arising from the government’s subsidies rationalisation plan which led to advertisers reducing their spending.

 On the other hand, the group’s operations in HK and Mainland China jumped 31% QoQ to RM72m mainly driven by the growth in advertising revenue from the local property market there.

Outlook  MEDIAC expects its business environment to remain challenging in the coming quarters due to the seasonal factor and on-going subsidy rationalisation measures, which could weight on consumer sentiments and ultimately affect the advertising spending in Malaysia. Meanwhile, the weakening of RM against the USD may also impact the group’s results in the coming quarter.

Change to Forecasts Reduced NP to RM167m (-0.7%) after fine-tuning but maintained our FY15 earnings estimate.

Rating Upgraded to MARKET PERFORM

Valuation  Maintained our MEDIAC’s TP to RM0.94 based on an unchanged targeted FY15 PER of 10.0x (+0.5x SD).

Risks to Our Call   Lower-than-expected adex growth

Source: Kenanga