1HFY21 LATAMI of RM20.4m (-190%) and absence of dividends are within expectations. The group’s rebound from losses in 1QFY21 was led by stronger publication sales, which however, might be threatened by further movement restrictions. More stringent cost management and reviews could help mitigate earnings risk going forward. Dividend expectations remain non-existent for now in favour of better cash management. Maintain MP and TP of RM0.150.

1HFYF21 within our expectations but above consensus. 1HFY21 LATAMI of RM20.4m is deemed to be within our expectation but above consensus, with full-year LATAMI estimates of RM14.6m and RM30.0m, respectively. The positive deviation is likely due to consensus not accounting for the group profit turnaround led by its HK & Mainland China segment. No dividends were declared, as expected.

YoY, 1HFY21 revenue fell by 62% to RM226.9m from weaker sales in all fronts. Most notably, the Travel & Travel Related Services segment nearly diminished by 100% as no tour was possible during this period when international travel restrictions were at their peak. Thus, 1HFY21 registered a LATAMI of RM20.4m (-190% vs. 1HFY20 PATAMI of RM22.6m) mainly arising from the lower overall revenue failing to sustain costs.

QoQ, 2QFY21 revenue gained 27% thanks to recovery in all publication fronts. With movement restrictions easing up, the group’s distribution channels and physical sales are less hindered than in 1QFY21. On the back of the higher top-line, 2QFY21 successfully registered a PATAMI of RM3.3m (+114% vs. 1QFY21 LATAMI of RM23.3m).

Light at the end of the tunnel. This quarter’s profit turnaround should allow investors to breathe a sigh of relief as the group appears to have steered away from its worst quarterly performance. As revenue sustainability remains unclear, the group is likely to continue in rationalising its costs via staff right- sizing or accelerating the more efficient digital initiatives to attract advertisers. Though we do not expect international travel to return to healthy levels in the short-to-medium term, we believe publication performances should regain some lost ground as businesses catch up from the previous loss of commercial activity and consumer spending.

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

Maintain MARKET PERFORM and TP of RM0.150. Our TP is based on an unchanged 0.4x FY21E P/NTA which is raised by our improved assumptions. For the moment, it seems that the risk-to-reward is balanced, with the lack of dividends being disincentive for investors to accumulate the stock. That said, we believe the group will remain resilient with its solid cash pile to support operational activities for a prolonged period of time. While management is prudent with its investment decisions, there is comfort knowing it can 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) higher/lower-than-expected operating expenses.

Source: Kenanga Research - 26 Nov 2020