Media Chinese Int’l (BUY)

Listing Charming Travel

• Proposed to spin-off the Group’s travel and travel-related business by having a separate listing on the GEM of the HKEx.
• The proposed spin-off will involve the disposal of ~25% stake in the travel division with the Group retaining the balance of ~75%. The deal is expected to be completed by end 2012.
• As of FY12, the travel division reported a PAT of RM6.4m, representing only 3.3% of FY12’s PATAMI.
• In our FY13 earnings estimates, the travel division, contributes ~1.8% to our FY13 earnings estimate of RM196m. Hence, after adjusting for the 25% reduced stake in the division, the reduction in earnings impact is only by 0.5%.
• 8-10x P/E… We understand that the travel division will be listed within the range of 8-10x P/E multiple. Hence, by assuming that it will fetch a valuation of 10x P/E based on FY12’s PAT of RM6.4m, MCIL will receive cash proceeds of ~RM16m. This only makes up 4% of its FY12 net cash position of ~RM397m.
• Neutral… Although we welcome MCIL’s initiative to unlock value of its travel division through the capital markets, we feel that the size of this exercise and the earnings impact is minimal. Hence, we are neutral on it.
• Maintain BUY with TP of RM1.69 based on 11x FY13 P/E multiple. Ex-repayment TP of RM1.28.

Source: Hong Leong Investment Bank Research - 16 August 2012