1QFY22 core PATAMI of RM2.3m came above our/consensus expectations. Thanks to continuous cost management efforts, the margins have seen noticeable improvements YoY (e.g. 1QFY22 PBT margin of 6% vs. 1QFY21 of -33%) which led to core PATAMI soaring by >+100% from a net loss of RM13.6m in 1QFY21. With economic activities returning to normalcy in FY22 along with better cost control, we raise our FY22E/FY23E earnings, thus, raising our TP to RM0.335 while maintaining our MARKET PERFORM call.

1QFY22 above expectations. The group registered a PATAMI of RM2.3m which came above our/consensus LATAMI expectation of RM0.2m/RM0.8m, respectively. We believe this positive deviation may be due to an over-estimation of the group’s operating expense. No dividend was declared as expected.

YoY, 1QFY22 revenue rose by 22% to RM52.1m thanks to a 23% jump in revenue contributed from the print and digital segment as the reopening of the economy led to an increase in advertisement bookings. Following two consecutive years of losses before tax, the group’s core segment (print and digital) made a turnaround, contributing a profit before tax (PBT) of RM0.6m which is >+100% jump YoY. We believe the group’s cost management initiatives in FY20 and continuous cost optimisation efforts have resulted in the successful turnaround. In addition, despite the events and exhibition segment registering a drop in revenue of 74%, thanks to the aforementioned cost savings, the segment recorded an improvement of 58% in PBT. In line with higher revenue (+35% YoY), the radio segment recorded a PBT of RM2.2m (>+100%), contributing 74% to overall PBT. With that, the group’s PBT margin rose by 38.6ppt indicating the cost management initiatives implemented by the group. All in, the group registered a core PATAMI of RM2.3m up from a core LATAMI of RM13.6m in 1QFY21.

QoQ, 1QFY22 revenue rose marginally by 1.1% to RM52.1m from RM51.5m in 4QFY21 thanks to the increase in revenue in the print and digital, and radio segments. Core PATAMI, however, declined by 85% after excluding the one-off items for impairment of asset and reversal of compensation income, of RM71.6m and RM52.5m, respectively, in 4QFY21.

Strengthening digital initiatives. The group is focused on expanding its digital transformation strategies, and they have launched several initiatives in 2021. For instance, the group launched a news portal called Majoriti which concentrates on news and contents written in Bahasa Malaysia. The aim is to get into corporate collaborations to tap on their customer databases to gather more traffic to the portal. The group understands the need to invest in the digital space in order to improve its operational efficiencies and keep pace with continuous change in market needs and therefore plans on introducing more fresh products and restructuring existing ones. With economic activities returning to normalcy in FY22 and already noticeable margin improvements, we believe the group is set to gradually recover in FY22. However, we remain cautious as we believe the continuous cost management strategies have resulted in the PBT turnaround in the print and digital segment rather than contribution from digital initiatives.

Post results, we raise FY22E/FY23E earnings by >+100%, in line with better YoY performance, economic activities returning to normalcy and improved margins.

Maintain MARKET PERFORM with a higher TP of RM0.335 (previously RM0.330) based on P/NTA of 0.4x (0.5SD below its 3-year mean level).

Key risks to our call include: (i) higher/lower-than-expected adex revenue, and (ii) better/lower-than-expected margins following various cost initiative plans.

Source: Kenanga Research - 25 May 2022