FY22 core PATAMI of RM0.4m came in below our/consensus expectation at 4%/5%, respectively. The increase in Omicron cases in 1QCY22 led to decreased retail spending and economic growth in most countries, thus, dragging down the group’s earnings. Moving forward, the Malaysian economy is expected to grow between 5.0- 5.5% in FY22, thus, positively benefiting the group. However, we remain cautious of the Hong Kong economic outlook and slow recovery in the travel segment. We maintain our call at MP but with a higher TP of RM0.190 as we roll our valuation base to FY24E.

FY22 came below expectations. FY22 registered a core PATAMI of RM0.4m which came below our/consensus expectation at 4%/5% of full-year PATAMI of RM10.2m/RM8.1m, respectively. We believe the negative deviation is due to the overestimation of the publishing and printing segment in the Malaysian market. A dividend of 0.63 sen (or 0.15 USD cents) was declared which came in higher than our earlier estimate of 0.4 sen.

YoY, FY22 revenue rose by 6% from RM483.4m in FY21 to RM511.3m in FY22 thanks to general global economic recovery. The Malaysian market saw an increase of 2% contributing an additional RM6.3m to group’s revenue. However, in 2021 the Hong Kong economy expanded by 6% in real terms over 2020 resulting in a 10% jump in revenue which is equivalent to RM14.8m. Moreover, the group’s travel segment is gradually recovering; however, its contribution to group revenue remains <1% compared to c.30% pre-Covid. Thanks to improvement in revenue and cost savings, profit before tax (PBT) margin rose by 3ppt to 2.2%. After adjusting for fair value gains on investment properties of RM1.3m, core PATAMI rose by >+100% to RM0.4m from a net loss of RM14.3m in FY21.

QoQ, revenue dropped by 11% from RM140.7m in 3QFY22 to RM125.5m in 4QFY22 due to a 12% and 30% drop in overall publishing and printing segments and travel segment as the increase in Covid-19 cases driven by the new Omicron variant diminished retail spending and economic growth. With that along with rising newspaper cost in 4QFY22, PBT margin fell by 7.7ppt to -0.7% from 7.0% in 3QFY22. After adjusting for the one-off item, core PATAMI plunged to a net loss of RM4.5m from a net profit of RM7.0m in 3QFY22.

Outlook. 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 publishing segment moving forward. However, with the Malaysian segment being the largest contributor to revenue (c.60%) and considering our in-house GDP forecast for CY22 to be between 5.0- 5.5%, we believe the Malaysian segment may continue to grow as adex is highly correlated to the economy, thus positively benefitting the group moving forward. However, we remain cautious as the recent GDP downgrade by the Hong Kong government for CY22 and slow recovery in the travel segment may offset earnings from the Malaysian segment.

Post results, we lower our FY23E earnings by 5% after a slight adjustment and introduce FY24E earnings where we anticipate earnings to rise by 65%.

Maintain MARKET PERFORM with a higher TP of RM0.190 (previously RM0.180) as we roll our valuation base to FY24E NTA/share based on P/NTA of 0.46x (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 recovery of the economy in FY22 to benefit the group’s publishing and printing segment moving forward. However, we remain cautious of the Hong Kong segment (which currently contributes c.33% to group’s revenue) and the travel segment.

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 - 27 May 2022