News  Press reported that MEDIA has offered a mutual separation scheme (MSS) to its employees as part of the group’s rationalisation and consolidation plan.

 The group is targeting 10% of its current workforce (>4.6k) to accept the offer which will remain open until the end of the month.

 A MEDIA’s senior management officer was quoted that letters have been issued to all its staffs regardless of their years of service in the company.

 Staff who chooses to take up the offer will be paid compensation equivalent to 1.5 times their length of service in years multiplied by their last drawn base salary. The MSS scheme is expected to be completed by December 15.

Comments  We are POSITIVE on the news as it could improve the group’s efficiency and profitability over the longterm, albeit its FY14/15 earnings is expected to be dampened by the one-time MSS cost.

 MEDIA’s overheads cost stood at RM787.2m with a total staff count of 4.678 as of end-FY13. Around 81% of the staff is permanent while the remaining under contract. Age-profile wise, the majority (or 59.3%) of the employees are between 30-50 years old while 411 (or 8.8%) are over 50 years old.

 For illustration purpose, assuming 10% of its workforce participate in the MSS scheme with an average 5-year of service, it will likely cost MEDIA c.RM50m.

Outlook  The local adex sentiment is expected to remain cloudy, in view of the recent petrol price hike and on-going subsidy rationalisation plans, which could further dampen the already weak consumer spending.

 Moving forward, we understand that MEDIA is aiming to continue to focus on: (i) growing its advertising revenue, (ii) implementing group-wide cost saving initiatives, and (iii) expanding its multiplatform content production for market beyond its TV network.

Forecast  We leave our earnings estimates unchanged for now, pending the outcome of the MSS.

Rating MAINTAIN MARKET PERFORM

While the group’s outlook appears cloudy, its high dividend yield could provide some cushions to share price.

Valuation  Maintained our TP at RM1.80 based on a targeted FY15 PER of 13.1x, representing a 6-year average forward PER.

Risks to Our Call Improvement in adex sentiment.

Source: Kenanga