Period  1Q15

Actual vs. Expectations Media Chinese Int’l (MEDIAC)’s 1Q15 net profit of USD8.3m (or RM26.6m) came in below expectations and accounted for 17% of our and 16.7% of the street full-year estimates, respectively. On our side, the key culprits were mainly due to lower-than-expected adex revenue, especially from Malaysia and higher-thanexpected operating cost.

Dividends  No dividend was declared during the quarter.

Key Results Highlights YoY, 1Q15 revenue was lower by 9% to RM371m, no thanks to the lower revenue contribution from the publishing and printing segment (-10.8% to RM288m). PBT, meanwhile, slid by 34% as a result of lower revenue and higher administrative expenses.

 QoQ, the turnover grew 16% as a result of higher revenue from the tour segment as Easter Holidays fell n April this year and the low base effect as the 4Q is seasonally a quiet season for the publishing and printing segment. EBIT, however, decreased by 4% mainly due to higher labour costs.

 Both RM and Canadian Dollar continued to weaken against USD during the quarter which resulted in a negative currency impact on the group’s turnover and PBT of USD4.1m and USD0.7m, respectively.

 Its Malaysia publishing and printing segment revenue dipped by 12.4% YoY to RM214m in 1Q15 due mainly to: (i) absence of political advertisement, (ii) the weak consumer spending arising from the government’s subsidies rationalisation plan, and (iii) the spill-over effect of the MH370 incident.

 In its HK and Mainland China segment, meanwhile, revenue was lower 3% YoY to RM55m while the segment PBT was reduced to RM3.0m (-5% YoY) due to the weak retail sales (especially for luxury and branded labels) although the country’s property market has started showing some recovery signs.

Outlook  MEDIAC expects its business environment to remain challenging in the remaining quarters due to the economic uncertainties and lower consumer confidence. Although the recent fall in newsprint prices are expected to cushion its earnings, advertising revenue remains cloudy as a result of cautious spending by both consumers and businesses.

Change to Forecasts

 Reduced both FY15E (-17.1%) and FY16E (-9.7%) net profits after lowering adex revenue and raise distribution and labour costs assumptions.

Rating Downgraded to UNDERPERFORM (from MP)

Valuation  Lowered our MEDIAC’s TP to RM0.81 (from RM0.92 previously) based on targeted FY15 PER of 10.5x, representing a 5-year average PER.

Risks to Our Call Better-than-expected adex growth

Source: Kenanga