Period

2Q16/1H16

Actual vs. Expectations

Media Chinese Int’l (MEDIAC)’s 1H16 net profit of USD16.5m (or RM72.3m) came in above expectations; accounting for 62.6%/60.9% of our/street’s full-year estimates. The positive deviation was mainly due to our currency forecast, where we merely imputed RM3.79 (for USD1) vs. the actual RM4.3955. Should we rebase on USD terms estimate, the group’s 1H16 would have made up c.54.6% of our full-year estimate and within expectation.

Note that the 1H normally made up c.50%-57% of the full-year earnings, based on the past three years.

Dividends

Declared a 1.931 sen (or US 0.50 cents) dividend with the ex-date set on 8 December. On a full-year basis, we expect the group to declare a 3.7 sen DPS, translating into a decent dividend yield of 6.0% or a payout ratio of 50.7%.

Key Results Highlights

YoY, 1H16 revenue dipped by 17% to RM867m due to lower contribution from the publishing and printing segment. PBT, however, declined by 10% as a result of stringent cost control, which resulted in the margin improving 80bps to 11.9%. Stripping off the currency impact, 1H16 turnover would have weakened by 7.4% while its PBT would have registered an increase of c.6%.

QoQ, turnover slid by 3%, as a result of lower publishing revenue but partially offset by higher tour segment contribution. Its PBT, meanwhile, was lower by 13% to RM48.2m due to lower turnover and margins.

Its Malaysian publishing and printing segment’s revenue dipped by 30.6% YoY to RM200m in 2Q16 amid the soft advertising market and weak consumer sentiment in all its publishing segments. Nevertheless, by implementing more effective cost management strategies, the segment’s PBT dropped by a lower quantum of 25.9% YoY to RM41.3m. If we exclude the currency impact, the decrease in the Malaysia segment’s turnover and PBT would be only 12% YoY and 4.7% YoY, respectively.

Outlook

Outlook remains challenging in view of the cautious advertising spending environment coupled with increased competitive pressures from other media platforms. While lower newsprint prices could provide some earnings cushion, it may have an adverse impact should MYR continues to depreciate against USD.

Change to Forecasts

Lowered FY16E/FY17E NP by -2.7%/-0.5% after finetuning the administrative cost assumption. Meanwhile, we also revised our FY16E/FY17E currency forecast to RM4.19/RM4.30 (from RM3.85/RM4.00 previously).

Rating

Maintained MARKET PERFORM

Valuation

Raised our MEDIAC’s TP to RM0.61 after rolling over the valuation base year to FY17E with unchanged targeted PER of 7.7x, representing an unchanged -1.0x below its 5-year mean.

Risks

Lower-than-expected adex growth

Source: Kenanga Research - 26 Nov 2015