Period  4Q14/FY14

Actual vs. Expectations Media Chinese Int’l (MEDIAC)’s FY14 net profit of USD48.2m (or RM158m) came in below our forecast but largely within consensus expectation, at 90.6% and 95.3%, respectively. On our side, the key culprits were mainly due to lower-than-expected adex revenue from both Malaysian and HK operations.

Dividends  Declared a 2.19 sen (or US 0.68 cents) dividend with the ex-date set on 9 July. On a full-year basis, the group has declared a total DPS of 4.67 sen (or US 1.43 cents), translating into a dividend yield of 4.7% or payout ratio of 50.0%.

Key Results Highlights YoY, the FY14 revenue was lower by 2% to RM1.5b, no thanks to the lower revenue contribution from all segments except the tour division (+14% to RM88m). PBT, meanwhile, declined 11% due mainly to higher finance costs. The lower PBT coupled with higher tax expenses led its net profit lower to RM158m (-15%) in FY14.

 QoQ, the turnover slid 15% to RM325m as a result of the seasonality factor and lower adex revenue mainly led by the chain effect of the MH370 incident. EBIT was also reduced by 33% due mainly to higher operating expenses.

 Both RM and Canadian Dollar continue to weaken against USD in FY14, which resulted in a negative currency impact on the turnover and PBT of USD11.4m and USD2.4m, respectively.

 The Malaysian publishing and printing segment revenue dipped 11.3% QoQ to RM214m in 4Q14 due mainly to: (i) lack of political advertisements, (ii) the weak consumer spending arising from the government’s subsidies rationalisation plan, and (iii) the MH370 incident.

 Its HK and Mainland China segment, meanwhile, saw lower revenue by 3.8% QoQ to RM51m due to intensified market competition and slowing economy.

Outlook  MEDIAC expects its business environment to remain challenging in the financial year due to the economic uncertainties and intensified competition in the group’s major markets. Although newsprint prices are expected to be stable, its advertising revenue outlook remains cloudy as a result of cautious spending by both consumers and businesses.

Change to Forecasts Reduced FY15E NP to RM156m (-2.4%) after lowering revenue and raise operating cost assumptions. Meanwhile, we also introduce our FY16 estimate.

Rating Maintain MARKET PERRFORM

Valuation  Lowered our MEDIAC’s TP to RM0.92 (from RM0.94 previously) based on lower targeted FY15 PER of 9.9x (from 10x previously), representing a 5-year average PER.

Risks  Lower-than-expected adex growth

Source: Kenanga