News

Media Chinese Int’l (MEDIAC) announced that its shares will be suspended, pending a material announcement.

Similarly, its dual listing vehicle and subsidiary of the Company listed on the Hong Kong Stock Exchange – One Media Group Limited (OMG), has also announced a trading halt on their respective shares, pending the release of an announcement containing certain information pertaining to, among other things, a possible disposal involving the shares of One Media Group Limited.

MEDIAC owned 73.18% equity stake in OMG.

Comments

We are NEUTRAL on the news for now, pending the details of the announcement. Nevertheless, should the group decide to dispose or partially dispose OMG’s shares, the earnings' impact to MEDIAC is likely to be minimal.

OMG is primarily involved in the publishing of Chinese's language lifestyle magazines and provides digital and outdoor media services in the Great China region.

As of 1H16, OMG registered a turnover of HKD68.7m (-21.6% YoY) and contributed c.28.5% revenue to the group’s Hong Kong segment or 4.5% topline to MEDIAC’s total turnover. In tandem with its tepid revenue trend, OMG reported a loss before tax of HKD1.06m amid a slowdown in the retail sector caused by weak consumer demand and reduced spending by Mainland tourists.

Based on pre-suspended last traded price of HKD1.22, OMG has a market cap of HKD489.1m and is trading at 3.0x above its BV/share.

Outlook

Outlook remains challenging in view of the cautious advertising spending environment amid rising cost of doing business. While lower newsprint prices could provide some earnings cushion, it may have an adverse impact should MYR continue to depreciate against USD.

Forecast

We make no changes to our FY16/17 earnings forecast for now.

Rating

MAINTAIN MARKET PERFORM

Valuation

Maintain our TP at RM0.61 based on a targeted FY17E PER of 7.7x, representing -1.0x SD below its 5-year mean.

Risks to Our Call

Lower-than-expected adex growth.

Source: Kenanga Research - 12 Jan 2016