1QFY21 LATAMI of RM24.3 (-351%) and lack of dividends are within expectations.We expect the group to continue registering losses for the year, albeit at a narrowing rate as regional business activities progressively recover and travel restrictions ease. That said, investors might keep a cautious eye on these spaces in the event of amajorsecond wave. Upgrade to MP but maintain our TP of RM0.145 based on P/NTA valuation.

1QFYF21 within our expectations but below consensus. 1QFY21 LATAMI of RM24.3m is deemed to be within our expectation but below consensus, with full-year LATAMI estimates of RM37.4m and RM14.6m, respectively. It is likely that the group will continue to operate in a loss-making environment as publications and international travel have been widely affected by the Covid-19 pandemic with recovery being a medium-term vision. No dividends were declared, as expected.

YoY, 1QFY21 revenue declined by 66% to RM103.7m from weaker sales in all fronts. Most notably, the Travel & Travel Related Services segment nearly diminished by 100% as no tour bookings were possible in this period when international travel restrictions were at its peak. Thusly, 1QFY21 registered a LATAMI of RM24.3m (-351% vs. 1QFY20 PATAMI of RM9.7m) mainly arising from the lower overall revenues, failing to sustain costs.

QoQ, 1QFY21 revenue deteriorated by 34% mostly due to the same reasons above. Interestingly, print revenue from HK & Mainland China improved 12% QoQ likely from that region having mostly contained the virus spread and economic implications of Covid-19 during the 4QFY20/1QCY20 period. Still, LATAMI widened from RM7.3m to RM24.3m coinciding with the softer top-line.

The worst might be over. Amidst the growing challenges, the group is continuing to seek ways to keep its costs lean, with further staff rationalisation being a likely option. Embracing the accelerated digitalisation brought by inbound restrictions, the group is tapping more aggressively into its digital channels to cater to the needs of advertisers. We expect the group to continue its drive to host virtual expos and webinars to build on its digital footprint and presence.

If the performance in the HK & Mainland China region is to go by, the group should see progressive lifts in advertising demand in its other regions as they recover from the socio-economic implications of the pandemic. Additionally, travelers could revisit their travel plans if pandemic concerns dissipate.

Post-results, we leave our earnings assumptions relatively unchanged.

Upgrade to MARKETPERFORM (from UNDERPERFORM) with an unchanged TP of RM0.145. Our valuation is based on a 0.4x FY22E P/NTA, 1SD below the stock’s 3-year mean. We believe that current price points have closely reflected the challenging landscape that MEDIAC is up against. This is further cushioned by the stock’s high net cash per share, which ranges between 13.0-14.0 sen/share. Though there is reason to believe subsequent quarters might not demonstrate losses as deep as this quarter, investors might still shy away given the uncertainties surrounding the advertising and travel industries. While management is prudent with its investment decisions, there is comfort of knowing it is able to capitalize on attractive strategic opportunities should they arise.

Key risks to our call include: (i) higher/lower-than-expected adex revenue, (ii) higher/lower-than-expected travel services business, and (iii) lower/higher than-expected operating expenses.

Source: Kenanga Research - 1 Sept 2020