9MFY21 registered a core PATAMI of RM26m (+201% YTD) which came below our/consensus full-year expectations. Despite the poor QoQ performance as a result of the nationwide lockdown in 3QCY21, the group managed to remain profitable, thanks to better PAT margin in the broadcasting segment as a result of effective cost streamlining in the segment in FY20. Overall, we continue to remain positive on the group’s outlook due to the group’s recent partnerships. Maintain OP with a lower TP of RM0.560 (previously RM0.690).

9MFY21 below expectations. The group registered a PATAMI of RM26.3m which came in below our and consensus full-year PATAMI expectations of RM40.6m (65%) and RM37.5m (70%), respectively. We believe the negative deviation is due to an overestimation of advertising sales. No dividend was declared as expected.

YoY, 9MFY21 revenue rose by 8% to RM804.3m from RM743.5m as an increase of 114% in the Omnia segment further bumped up the group’s revenue. Home-shopping saw a decline of 6% mainly due to lower consumer spending in the current quarter which we believe was due to consumers preferring to preserve cash during the nationwide lockdown in 3QCY21 as only certain sectors were allowed to operate during that period. The out-of-home segment continued to see a decline YTD by 22%. Moreover, as a result of lower advertising and printing revenue, the publishing segment saw a 15% decrease YoY (RM32.4m in 3QFY21 vs RM38.1m in 3QFY20). All in, the group registered a core PATAMI of RM26.3m, up by 201% from a core LATAMI of RM26m in 9MFY20.

QoQ, revenue dropped by 12% as 2QFY21 performance was mainly driven by higher advertising and home shopping revenue due to the Hari Raya festival. The broadcasting segment dropped by 6% which is in line with the data gathered by Nielsen showing a mere 0.2% decline in FTA TV adex and 29% drop in radex. Lower revenue along with higher ETR (52% in 3QFY21 vs. 35% in 2QFY21) resulted in core PATAMI declining 43% to RM7.6m.

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 three consecutive quarters, registering a PAT margin of 74% in 9MFY21 (vs. -11% in 9MFY20). Moreover, following the rebranding of NTV7 to Didik TV after a collaboration with the Ministry of Education, the adex for this channel jumped by 62% to RM76.0m from RM46.7m in 1QFY21 resulting in 3QCY21 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 cut our FY21E/FY22E earnings by 12% /8%, respectively, to account for the drop in earnings.

Maintain OUTPERFORM with a lower TP of RM0.560 (previously RM0.690) based on a 2.0x FY22E P/NTA (0.5SD above the group’s 3- year mean). Despite the nationwide lockdown in 3QCY21, the group continued to remain profitable thanks to better PAT margins in the broadcasting segment as a result of the effective cost streamlining in the segment in FY20. Thus, we continue to give above-mean valuation which is also premised on the group’s resiliency and optimistic earnings growth expectations of c.861-45% for FY21-22.

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 - 26 Nov 2021