FY20 PATAMI of RM30.4m (+79%) and total dividends of 1.1 sen missed expectations, owing to 4QFY20 losses caused by Covid-19 impeding revenue. The group will likely continue to experience headwinds in the near-term, especially from its travel segment while print and publication segment will continue to fall behind digital platforms. We anticipate FY22 to be better, hoping Covid-19 induced restrictions will be progressively eased. Downgrade to UP (from OP) with a lower TP of RM0.155 from lower P/NTA valuation.

FY20 missed expectations. FY20 PATAMI of RM30.4m missed expectations, making up only 72%/77% of our/consensus respective fullyear estimates. The negative deviation was due to the socioeconomic impact of the Covid-19 pandemic being much greater than anticipated, impeding performance across all revenue streams in 4QCY20. A final dividend of 0.4 sen (or 0.1 USD cents) was declared, amounting to a fullyear payment of 1.1 sen (or 0.26 USD cents). This is way below our early expectation of 1.5 sen (60% payout), undermined by 4QFY20’s poor results amidst the ongoing pandemic.

YoY, FY20 revenue declined to RM1.03b (-16%) due to weaker sales in all fronts; (i) print and publication segment in all regions as traditional media platforms continued losing advertising share to digital media; and (ii) travel services being hindered by travel restrictions arising from the Covid-19 pandemic. In spite of the lower topline, FY20 registered a stronger core PATAMI of RM30.4m (+79%) with FY19 having undergone various cost savings initiatives in production and manpower.

QoQ, 4QFY20 saw revenue diminished by 28%, mainly due to the travel segment (-67%) being worsened by the abovementioned travel restrictions. The print segment also saw a decline likely from physical print purchases also suffering a set back during the period. Owing to the lower revenue, 4QFY20 registered a LATAMI of RM7.7m from 3QFY20 PATAMI of RM13.9m.

This storm too shall pass. The group looks to have a difficult year ahead as the Covid-19 pandemic brought many global socioeconomic implications, with lockdowns and movement control measures being implemented to curb its spread. This has translated to declining consumption and demand for physical print media and caused international travel halting to an almost complete standstill. As regulations are progressively relaxed globally, there is hope that the later quarters of the year could be revived alongside economic activity.

Post results, we slash our FY21E earnings by 74%. The group may continue to bear the brunt of movement and travel controls, particularly affecting the travel segment. Print publications could also be undermined by the increased consumption of digitalized media in recent months. With earnings under pressure, we cut back on our dividend expectations to 0.2 sen (from 1.5 sen) in line with the softer earnings and anticipation that management will conserve cash during this period. At the meantime, we introduce our FY22 estimates which we expect to demonstrate earnings recovery as movement restriction eases.

We downgrade MEDIAC to UNDERPERFORM (from OUTPERFORM) with a lower TP of RM0.155 (from RM0.245). In addition to the lower earnings, we also trim our applied FY21E P/NTA valuation to 0.4x (from 0.6x), which is 1SD below the stock’s 3-year mean. Our lower valuation is reflective of the poorer appetite for stocks which are more vulnerable to a potentially prolonged Covid-19 pandemic. We believe our new target price is cushioned by the stock’s net cash per share of 14.0 sen to weather through the abovementioned outlook.

Source: Kenanga Research - 25 Jun 2020