1QFY22 registered a core PATAMI of RM6.0m (+15% YoY) which is deemed to be within expectations despite only making up 9%/8% of our/consensus full-year estimates as 1Q is generally the weakest quarter. 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 an unchanged TP of RM0.740.

1QFY22 deemed within expectations. Core PATAMI of RM6.0m (+15% YoY, -79% QoQ) registered by the group is deemed within expectations despite only making up 9%/8% of our/consensus full-year estimates as 1Q is generally the weakest quarter for the group (1QFY21 core PATAMI of RM5.2m was 9% of FY21 core PATAMI). No dividends were declared, as expected.

YoY, revenue slipped by 3% to RM247.5m mainly due to a 44% drop in the home-shopping segment as consumers returned to physical stores post easing of movement restrictions. However, the drop was cushioned by a 33% jump in the Omnia segment thanks to advertising (ad) revenue rising by 14% (out-of-home ad sales was consolidated under Omnia from 1HFY21) and 28% increase in the broadcasting segment. Despite revenue declining YoY, the group’s core PATAMI rose by 15% to RM6.0m thanks to lower depreciation and amortization expenses and higher other operating income resulting in a 2.1ppt increase in EBIT margin to 6.9% from 4.8% in 1QFY21.

QoO, revenue fell by 22% as revenue across all segments dropped (1Q is historically a weak quarter) except for out-of-home segment rising by 16%. As a result, core PATAMI plunged by 79% from RM28.9m in the previous quarter.

Outlook. We continue to remain positive on the group’s outlook as the group’s Omnia segment continues to grow resiliently indicating a strong ability in selling advertising space and providing sales solution to clients. With our in-house expectations of a 5.0-5.5% Malaysian economic growth, 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 improved from 11% in FY20 to 17% in FY21 (+0.1ppt in 1QFY22) and we believe the growth will continue to take place as MEDIA continues monitoring the cost management initiatives moving forward. 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 make no changes to our FY22E/FY23E earnings as we have accounted for the weaker earnings in 1Q.

Maintain OUTPERFORM with an unchanged TP of RM0.740 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 - 31 May 2022