Period  4Q14/FY14

Actual vs. Expectations  MEDIA’s FY14 core PATAMI of RM142m (-34% YoY) is within our but below street estimates. The result accounted for 101.9% and 90.6% of our, and consensus’, full-year estimates, respectively.

 Reported PATAMI, however, plunged to RM76m (-65% YoY) due mainly to the one-off mutual separation scheme (MSS) expenses amounting to RM79.8m in 4Q14. No further MSS cost is expected to in the following quarters.

Dividends  A final single-tier DPS of 5.0 sen was declared, bringing its full-year DPS to 11.0 sen (FY13: 14.0 sen) but below our estimate of 14.0 sen.

Key Result Highlights  YoY, FY14 turnover slipped 13% to RM1.5b, no thanks to the lower revenue contribution from its key segments, namely TV (-12%, mainly due to slower adspend), Print (- 17%, mainly due to both lower advertising and newspaper sales), and the Outdoor division (-7%, as a result of the slower take-up by advertisers). Management attributed the weak adex sentiment in FY14 to market uncertainties, weak consumer sentiment and the tragic airlines incidents, which led to advertisers adopting a ‘wait-and-see'’ attitude and holding back on their adspend. The group’s EBIT, however, dipped 31% to RM210m with margin narrowing to 14.0% (vs. 17.8% in FY13) as a result of the persistently high fixed costs. Its PATAMI, meanwhile, plunged 65% to RM75.5m due mainly to the MSS cost of RM79.8m in 4Q14. Stripping off the MSS cost, the group’s core PATAMI would have only contracted by 34%.

 QoQ, the group’s turnover inched up 1% while PATAMI dipped >100% as a result of the MSS expenses. Stripping off this extraordinary item (“EI”), its core PATAMI would have declined by 13%.

Outlook  The adex sentiment is expected to remain weak, in view of the current rising cost of living and the upcoming GST implementation. Nevertheless, we believe there is a fair chance for the adspends to improve in both February and March due to the potential pre-GST fever.

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

Change to Forecasts  Post-results, we have lowered our FY15E NP forecasts by 2.2%, after lowering advertising revenue in both TV and print division. On top of that, we also lowered our targeted FY15 DPS to 11.0 sen (from 14.0 sen previously). Meanwhile, we also take this opportunity to introduce our FY16E.

Rating Maintain MARKET PERFORM While the group’s outlook appears gloomy, its high dividend yield could provide some cushions to its share price.

Valuation  Our TP has been reduced to RM1.74 (from RM1.78 previously) based on a lower targeted FY15 PER of 13.0x (from 13.1x previously) and representing a 6-year average forward PER.

Risks to Our Call  Upside risk - Improvement in adex sentiment. 

Source: Kenanga