9MFY22 core PATAMI of RM4.9m came in above our/consensus expectation (>+100%). Thanks to the improvement in the Malaysian market in 3QFY22, the local segment’s revenue rose by 30% resulting in 9MFY22 revenue rising to RM385.7m by 8% from RM358.8m in 9MFY21. We expect the Malaysian market being the largest contributor to group’s revenue to continue growing as the Malaysian economy further recovers in CY22, thus positively impacting the group’s margins moving forward. With that, we maintain MARKET PERFORM with a higher TP of RM0.180.

9MFY22 came above expectations. 9MFY22 recorded a core PATAMI of RM4.9m which came above our/consensus expectation of a full-year LATAMI of RM1.1m (>+100%)/RM4.6m (>+100%), respectively. We believe the positive deviation is due to the underestimation of the publishing and printing segment in the Malaysian market. No dividend was declared as expected.

YoY, 9MFY22 revenue jumped by 8% from RM358.8m in 9MFY21 to RM385.7m in 9MFY22 thanks to the Hong Kong economy recovering by 5% YoY in 4QCY21 and for 2021 as a whole, GDP rose by 6% in real terms over 2020. Thus, the Hong Kong and Mainland China market jumped by 13% YTD contributing RM15.6m more than the previous year to the group’s revenue. Moreover, the group’s travel segment continued to contribute <1% to the group’s revenue compared to c.30% pre-Covid as lockdowns and emergence of new variants hampered travelling. Thanks to the improvement in revenue in the Malaysian market in 3QFY22, the group’s PBT margin turned around to +3% in 9MFY22 from -4% in 9MFY21. All in, the group registered a core PATAMI of RM4.9m, up by 134% from a core LATAMI of RM14.5m in 9MFY21.

QoQ, revenue rose by 12% thanks to a 28% improvement in the Malaysian market as the government relaxed movement controls and restrictions in 4QCY21. This is in line with the data gathered by Nielson depicting a 52% QoQ increase in newspaper adex in 4QCY21. In line with higher revenue, PBT for the Malaysian segment rose by >+100% to RM12.8m. With that, the group’s core PATAMI jumped by 20% to RM7.0m from RM5.8m in 2QFY22.

Outlook. The group is expecting 4QFY22 to remain challenging as the new Omicron variant is spreading quickly across countries and disrupting business activities in 1QCY22. 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 the group believes may affect the its publishing segments moving forward. However, with the Malaysian segment being the largest contributor to revenue (c.55%) and considering our in-house GDP forecast for CY22 to be in between 5.5%-6.0%, we believe the Malaysian segment may continue to grow as adex is highly correlated to the economy, thus positively benefitting the group moving forward.

Post results, we raise earnings by 1,021%/584% for FY22E/FY23E, respectively, to account for improved performance in publishing and printing segment.

Maintain MARKET PERFORM with a higher TP of RM0.180 (previously RM0.175) 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.

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

Source: Kenanga Research - 28 Feb 2022