Period

4Q15/FY15

Actual vs. Expectations

MEDIA’s FY15 core PATAMI of RM139m (-2% YoY) came in below expectations, at 93.9% of our, and 93.6% of the streets’, full-year estimates.

The negative deviation on our end was mainly due to lower-than-expected revenue contribution from the newspaper, outdoor and digital segments.

Dividends

As expected, a final single-tier DPS of 5.0 sen was declared, bringing its full-year DPS to 10.0 sen (FY14: 11.0 sen) translating into a dividend payout of 80% and 7.6% yield. Key Result

Highlights

YoY, FY15 net revenue came in lower at RM1.4b (-5%), no thanks to the weaker performance in all its key segments as a result of the subdued market sentiment. The group’s circulation revenue (by print media) was lower by 15%, in tandem with declining global circulation trend. PBT, however, improved significantly to RM200m (+97%) as a result of the one-off MSS cost of RM79.8m incurred in 4Q14, which resulted in a lower base effect.

QoQ, revenue stayed flat while EBIT dipped by 8% due to higher overhead costs. Its PATAMI, meanwhile, deteriorated by 28% as a result of a higher effective tax rate of 42.7% as a result of the accrual of income tax. .

Outlook

The adex sentiment is expected to remain weak, in view of the current rising cost of doing business. Furthermore, the weakening of MYR coupled with the current market uncertainties are expected to continue sapping advertisers’ appetite over the near-term. At industry level, management believes factors such as consumer fragmentation, technological advancements, shift in advertisement to the digital media and increased competition from new entrants will continue to pose challenges to the group.

MEDIA is expecting its home and online shopping business to go through a 2-year gestation period before achieving the breakeven point at the EBITDA level in 2Q18.

The discussion of the transmission cost structure (under the DTT service) has yet to be concluded. Nevertheless, management has reaffirmed its stands of maintaining its current transmission cost structure (at c. RM40m/year).

Moving forward, we understand that MEDIA is aiming to continue to focus on: (i) growing its non-traditional revenue (i.e. home and online shopping) while maintaining its leading viewership positions through high quality contents and new programmes introduction, and (ii) continue its effort in managing the costs and improving operational effectiveness and efficiency.

Change to Forecasts

We lowered our FY16E NPs by 7% after factoring in lower revenue assumptions coupled with some start-up losses in its home and online shopping segment. Meanwhile, we also take this opportunity to introduce our FY17E numbers.

Rating

Maintain MARKET PERFORM

Valuation

Our TP lowered to RM1.39 (from RM1.48) based on targeted FY16E PER of 11.0x, representing an unchanged targeted -0.5 SD below the 6-year mean.

Risks to Our Call

Downside risk – failure to renegotiate the transmission cost under the DTT service.

Source: Kenanga Research - 29 Feb 2016