Media Chinese International (MCIL)’s share price performance has lagged behind that of its peers. Its FY13 results are expected to be released by the end of this month and we believe the numbers should at least meet our forecast. We still think that its business model is stable but there are concerns arising from higher finance costs and the soft performance from its Hong Kong division. Maintain TRADING BUY and a MYR1.31 FV.

- Share price performance softer than peers’.  MCIL’s share price had lagged behind and moved slower than that of other media companies. In fact, there had not been any significant share price movement since the general election was concluded.

-  Weathering higher newsprint costs. In a previous report, we highlighted that newsprint costs may start to climb as soon as 2Q although we believe that MCIL has sufficient inventory (acquired at a lower price) to weather this rough patch. The recovery in adex may possibly help to offset the hike in newsprint costs.

-  Still has a stable business model. We still think  that MCIL’s business is stable, as advertisers cannot ignore the Chinese community and Chinese-literate population. Statistics show that readership for Chinese publications is on the rise, and hence, we believe MCIL still has stable prospects and is forking out decent dividends. It is expected to announce its full-year financial results by the end of this month. We think that the company may be able to meet our expectations, if not exceed our forecasts.

-  Maintain TRADING BUY with MYR1.31 FV.  That said, we keep our TRADING BUY recommendation for the stock, to address the concern of escalating finance costs from the debt it raised last year to pay a bumper dividend as well as the soft performance from its Hong Kong division. We make no changes to our forecasts at this juncture, and maintain our MYR1.31 FV, based on 14.5x CY13F EPS. 

Source: RHB