1HFY21 reported a core PATAMI of RM18.7m (+149% YoY) which was within our expectations mainly thanks to the revitalization of adex revenue. The publishing segment also returned to black as cost rationalization exercises finally paid off. Overall, MEDIA is expected to gain positive traction from its recent partnerships in addition to adspend making a comeback with the reopening of the economy. Upgrade to OP (from MP) to capitalize on recent share price weakness. TP of RM0.690 unchanged.

1HFY21 within expectations. PATAMI of RM18.7m was registered in 1HFY21 which came in within our, but above consensus, full-year PATAMI expectations of RM40.6m (46%) and RM28.3m (66%), respectively. We believe consensus had underestimated the advertising sales for 2QFY21, thus, resulting in the variance. No dividend was declared as expected.

YoY, 1HFY21 revenue rose by 15% thanks to a 220% increase in the Omnia segment which contributed c.50% to the group’s revenue. Recall that Omnia started contributing to the group’s revenue in 2QFY20. Moreover, broadcasting increased by 50% due to higher television advertising revenue in 2QFY21 which is in line with the data gathered by Nielsen showing a 55% rise in FTA TV adex whereby MEDIA continued to steadily contribute 7% to FTA TV adex. Home-shopping was stable with a slight decline in revenue by 0.7%. With the continuous ongoing lockdowns in 1HFY21, this negatively impacted the out-of-home segment which declined by 21%, deteriorating PBT margins to -9% from 1% in 1HFY20. Meanwhile, other key segments gained PBT-wise thanks to their stronger topline performance. All in, the group registered a core PATAMI of RM18.7m up by 149% from a LATAMI of RM38.3m in 1HFY20.

QoO, revenue rose by 15% due to higher contribution from Omnia. In line with the higher revenue, PBT jumped by 101% to RM19.3m, which along with lower ETR resulted in a core PATAMI of RM13.4m (+156%).

Outlook. We continue to remain positive on the group’s outlook as we see that MEDIA’s various partnerships have boosted the group’s advertising revenue and continue to support the content creation segment. Recall that the content creation segment was loss making in FY20; however, since the formation of various partnerships in 2021 this segment has been profitable for two consecutive quarters, registering a PBT margin of 53% in 1HFY21 (vs -12% in 1HFY20). Moreover, following the rebranding of NTV7 to Didik TV after a collaboration with the Ministry of Education, the adex for this channel jumped by 56% to RM73.0m resulting in 2QCY21 registering the highest adspend since 1QCY19 based on data provided by Nielsen. Last but not least, the launching of Omnia has drove higher advertising revenue for the group demonstrating the group’s strong ability in selling advertising space and providing sales solutions to clients.

Post results, we leave our FY21E/FY22E earnings unchanged.

Upgrade to OUTPERFORM (from MARKET PERFORM) with an unchanged TP of RM0.690, as the recent share price weakness presents a decent buying opportunity. Our TP is based on an unchanged 2.4X FY22E P/NTA (+1SD above the group’s 3-year mean). The above-mean valuation is premised on the group’s resiliency and optimistic earnings growth expectations of c.964-39% for FY21-22. Moreover, we believe the group will benefit from the economy reopening in the later parts of 2HFY21.

Risks to our call include: (i) lower-than-expected advertising revenue, (ii) higher-than-expected operating expenses, and (iii) changes in the regulatory environment.

Source: Kenanga Research - 27 Aug 2021