1HFY22 core LATAMI of RM2.1m came in below our expectation but above consensus full-year LATAMI expectation (10%). 1HFY22 revenue increased by 8% as a result of the better performance achieved in 1QFY22. The Malaysian market fell by 4.5% QoQ which we believe is due to the negative impact of the nationwide lockdown in 3QCY22. With international travel restrictions easing up for fully vaccinated individuals, we believe this will act as a catalyst to drive earnings in the later part of 2HFY22. We maintain MARKET PERFORM with a lower TP of RM0.175.

1HFY22 came below expectations. 1HFY22 recorded a core LATAMI of RM2.1m which came in below our full-year PATAMI expectation of RM2.1m but above consensus’ expectation of a full-year LATAMI of RM21m (10%). We believe the negative deviation is due to an overestimation of the publishing and printing segment in the Malaysian market as well as sales in the travel segment. No dividend was declared as expected.

YoY, 2QFY22 revenue remained flattish (-1%) at RM126m in 2QFY22 from RM127m in 2QFY21 which was due to a 13% decline in the publishing and printing segment in the Malaysian market. Despite the marginal drop in revenue, the group’s core PATAMI grew by 78% thanks to group’s continuing cost reduction efforts that offset the decrease in revenue and government subsidies in 2QFY22. On the other hand, YTD, the revenue improved by 8% thanks to higher revenue achieved in 1QFY22 (+19% YoY). With that said, overall publishing and printing segmental revenue rose by 6.8% YTD. The travel segmental revenue improved by 689% to RM2.0m from RM0.3m in 1HFY21; however, despite the huge surge YTD the segment only contributed 1.6% to the group’s revenue compared to c.30% pre-Covid. All in, the group registered a core LATAMI of RM2.1m up by 90% from a LATAMI of RM20.3m in 6MFY21.

QoQ, revenue improved by 5.7% due to an increase in revenue from its Hong Kong and Taiwan publishing and printing segment and travel segment. The Malaysian market dropped by 4.5% which we believe was due to the nationwide lockdown in 3QCY21. In line with higher revenue, core PATAMI rose by 174% to RM5.8m from a LATAMI of RM8m in 1QFY22.

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, the group is beginning to experience increase in costs such as paper costs as well as the discontinuation of government subsidies in most of its markets which may affect the group’s margins moving forward. Thus, MEDIAC will continue monitoring its costs and is strategizing to increase revenue by introducing more cross platform activities.

Post results, we cut earnings by 153%/65% for FY22E/FY23E, respectively, to account for poor performance in publishing and printing segment and travel segment.

Maintain MARKET PERFORM with a lower TP of RM0.175 (previously RM0.185) based on FY22E P/NTA of 0.45x (in-line with its 3-year mean). As the Malaysian market is one of the biggest contributors to the group’s revenue, we see the gradual reopening of the economy in 4QCY21 to benefit the group’s publishing and printing segment moving forward which we believe may help with the group’s margins. As for the travel segment, we continue to expect positive recovery in 2HFY22 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 - 25 Nov 2021