FY21 registered a core PATAMI of RM55.2m (>+100% YTD) which came above our/consensus full-year expectations at 154% and 144%, respectively, thanks to the group’s resilient Omnia segment and continuous efforts in cutting operating costs via various cost management initiatives. We continue to remain positive on MEDIA’s outlook as we believe the Omnia segment will continue to grow as the economy improves along with the group’s continuous cost cutting initiatives which will aid in further improving the EBITDA margin. Maintain OP with a higher TP of RM0.740 (previously RM0.560).

FY21 above expectations. PATAMI of RM55.2m was registered by the group which came in above our and consensus full-year expectations of RM35.8m (154%) and RM38.4m (144%), respectively. We believe the positive deviation came from the underestimation of advertising sales. A dividend of 1.5 sen per share which was declared came as a surprise.

YoY, FY21 revenue rose by 8% from RM1,041.6m in FY20 to RM1,120.2m in FY21 which was largely contributed by the Omnia segment (+79% YoY) thanks to the increase in advertising revenue as well as the consolidation of out-of-home sales arm under Omnia in 2HFY21 that helped bump up the segment’s revenue. Moreover, with less stricter movement restrictions in FY21 compared to FY20, home- shopping revenue declined by 13% as customers had more in-store shopping options. As a result of continuous cost management initiatives, the group’s EBITDA rose by 8ppt to 19% from 11% in FY20. Thanks to higher revenue and continuous cost saving initiatives, the group’s core PATAMI of RM55.2m soared by 1,276% from a core LATAMI of RM4.7m in FY20.

QoQ, thanks to several major advertising campaigns such as Lazada, Shopee and many more in 4QFY21, advertising revenue rose by 42% QoQ contributing to a jump in the group’s revenue by 23% to RM315.9m in 4QFY21 from 257.3m in 4QFY20. The broadcasting segment increased by 36% and publishing by 24% which is in line with the data compiled by Nielsen showing a 12% increase in FTA TV adex and 52% rise in newspaper adex. Higher revenue along with lower ETR (41% in 4QFY21 vs. 52% in 3QFY21) resulted in core PATAMI jumping by 279% to RM28.9m.

Outlook. We continue to remain positive on the group’s outlook as the group’s Omnia segment continues to grow QoQ indicating a strong ability in selling advertising space and providing sales solution to clients. With our in-house expectations of a 5.5%-6.0% Malaysian economic recovery, we believe the Omnia segment will continue to gain traction from advertisers as adex is highly correlated to the economy. Moreover, thanks to the group’s continuous effort in lowering operating cost via various cost management initiatives, EBITDA margin has improved from 11% in FY20 to 17% in FY21 and we believe the growth will continue to take place as MEDIA continues monitoring the cost management initiatives moving forward. Furthermore, the group’s partnerships with OTTs such as iQiYi and WeTV have resulted in over 100% uptick in content sales from FY20 demonstrating a successful content distribution and programming strategy. With the group planning on expanding their content reach and offering by leveraging on the growth of OTTs, we believe this will continue to add growth to the group’s content sales.

Post results, we raise FY22E earnings by 36% as a result of improved YoY earnings in FY21 and introduce our FY23E earnings.

Maintain OUTPERFORM with a higher TP of RM0.740 (previously RM0.560) as we roll over our valuation base to FY23E NTA/share based on 2.1x FY22E P/NTA (0.5SD above the group’s 3-year mean). We continue to give above-mean valuation due to the group’s robust Omnia segment, improved EBITDA margin and optimistic earnings growth expectations of c.28-26% for FY22-23.

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 - 24 Feb 2022