Period

3Q16/9M16

Actual vs. Expectations

Media Chinese Int’l (MEDIAC)’s 9M16 net profit of RM103m (-17.4% YoY) came in within expectations; accounting for 83.4%/85.4% of our/street’s full-year estimates. Note that the 9M period normally made up c.76%-91% of the full-year earnings based on the past three years’s performance.

The weak market sentiment coupled with prolonged currency volatility were the main reasons that adversely affected the group’s overall performance in 9M16 vs. a year ago.

Dividends

As expected, no dividend was declared during the quarter.

Key Results Highlights

YoY, 9M16 revenue dipped by 19% to RM1.2bm due to lower contribution from the publishing and printing segment. Its PBT, meanwhile, also declined, by 18%, in tandem with the weaker revenue. Stripping off the currency impact, 9M16 turnover would have weakened by 8.3% while its PBT would have only narrowed marginally by 0.9%.

QoQ, turnover slid by 17%, primarily due to the weaker travel and travel-related services segment revenue post the summer holiday season. Its PBT, however, was lowered by 4% to RM45.1m, thanks to effective cost control strategies.

Its Malaysian publishing and printing segment’s revenue dipped by 28% YoY to RM45m in 3Q16 amid the soft advertising market and weak consumer sentiment in all its publishing segments. Nevertheless, by implementing more effective cost management strategies (i.e. trimming down newsprint consumption and labour costs), the segment’s PBT dropped by a lower quantum of 14% YoY to RM11m. If we exclude the currency impact, the decrease in the Malaysian segment’s turnover would be only 8.1% while its PBT would have registered an increase of 10.2% YoY.

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 continue to depreciate against USD.

Having said that, we understand that the group will remain focused on strengthening operational efficiencies and striving for higher profitability through extensive marketing strategies and sustainable cost reduction.

Change to Forecasts

Raised FY16E/FY17E NP by 0.4%/1.5% after finetuning.

Rating

Maintained MARKET PERFORM

Valuation

Raised our MEDIAC’s TP to RM0.65 (from RM0.61 previously) based on targeted FY17E PER of 8.0x (vs.7.7x previously), representing an unchanged -1.0x below its 5-year mean.

Risks

Lower-than-expected adex growth

Source: Kenanga Research - 29 Feb 2016