1QFY22 core LATAMI of RM7.9m came in below expectations as stricter lockdown measures dragged local revenue. Lower government subsidies received from the North American market and travel segment led to a core LATAMI of RM7.9m (-3722% QoQ). With international travel restrictions easing up for fully vaccinated individuals, we believe this will act as a catalyst to earnings in the later part of 2HCY21. We maintain MARKET PERFORM with an unchanged TP of RM0.185.

1QFY22 came below expectations. 1QFY22 registered a LATAMI of RM7.9m which came in below our/consensus full-year PATAMI expectation of RM3.8m/RM3.2m, respectively. We believe the negative deviation is due to an overestimation of sales in the travel segment as we did not anticipate the prolonging of travel restrictions. No dividend was declared as expected.

YoY, 1QFY22 revenue rose by 19% to RM119m thanks to an increase in the publishing and printing segment and a marginal improvement in their travel segment from RM0.206m to RM0.256m. The Malaysian market improved by 20% as compared to 1QFY21, but recall that the preceding year faced tighter restrictions during the maiden MCO then. The group’s travel segment continued to be severely affected by the pandemic which is evident from the fact that the travel segment used to contribute c.30% to the group’s revenue pre-Covid. However, due to the closure of international borders and quarantine restrictions, the segment currently contributes merely 0.1%. Moreover, as a result of lower government subsidies received, the North American market and travel segment recorded higher LBT compared to 1QFY21. All in, the group registered a LATAMI of RM7.9m (+67%).

QoQ, revenue fell by 3% due to a 3.3% decline in its publishing and printing segment. This is a result of the reimposition of a full lockdown in June 2021 which negatively impacted the segment. With that, PBT declined by 174% resulting in a LATAMI of RM7.9m compared to RM0.2m (after adjusting for a one-off item; fair value gains on investment properties) in 4QFY21.

Outlook. The group is working on improving their digital content and therefore are developing more cross-platform advertising solutions for their clients and are also leveraging on their existing resources. This is in line with advertisers shifting their preference to digital platforms for better reach to consumers. Moreover, with countries gradually easing their international travel restrictions for fully vaccinated individuals we believe the group’s travel segment will gradually recover in the later parts of 2HCY21.

Post results, we cut earnings by 45%/23% for FY22E/FY23E, respectively, to account for poorer performances in the publishing and printing and travel segments.

Maintain MARKET PERFORM with an unchanged TP of RM0.185 based on FY22E P/NTA of 0.48x (in-line with its 3-year mean) which saw no material impact following our earnings adjustments. As the Malaysian market is one of the biggest contributors to the group’s revenue, we see the gradual reopening of the economy to benefit the group’s publishing and printing segment moving forward. As for the travel segment, we continue to expect positive recovery in the later parts of 2HCY21 as countries worldwide relax their international border restrictions for fully vaccinated individuals.

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

Source: Kenanga Research - 30 Aug 2021