Media  Chinese  (MCIL)’s  2QFY14  earnings  came  in  within  our expectations. Its publishing and printing businesses  continued to face headwinds while its tour segment performed strongly and helped boost the group’s topllne.  In our opinion,  MCIL lacks  strong growth catalysts amid  a  continued  challenging  operating  environment.  Maintain NEUTRAL and MYR1.06 FV.

• Earnings in line. MCIL’s 1H14 net earnings of MYR82.8m (-10.0% y-oy)  made  up  56.7%  of  our  FY14  forecast,  in  line  with  our  and  street estimates.  Its  2QFY14  topline  inched  up  3.2%  y-o-y  to  MYR409.0m, mainly  due  to  higher  revenue  contribution  from  its  tour  segment.  The group’s  publishing and printing arm  saw 2QFY14 revenue dipping  6% yo-y on increasing competition, but reported a 5.6% y-o-y improvement in pre-tax  profit,  mainly  attributed  to  lower  operating  costs  during  the quarter.
• Operations  overview.  MCIL’s  Malaysian  operation  saw  revenue declining  4.4%  amid  challenging market conditions,  but lower operating costs helped  lift  pre-tax profit by 9.5%. The group’s  operations in  Hong Kong, Mainland China  and  North America continued  to face  headwinds on  weak  market  sentiment  and  weakening  property  market.  For  the quarter  under  review,  its  tour  segment  helped  boost  the  overall performance,  given  strong  demand  for  its  high-quality  tour  packages, particularly its flagship European tours.
• Key risks. These are: i) possible newsprint price hikes, ii) volatility in the USD-MYR exchange rate, and iii) a slower-than-expected adex recovery, especially in the print media segment.   
• Maintain NEUTRAL.  Moving forward,  we  expect  MCIL’s core business to remain under pressure as it lacks growth catalysts. All in, we maintain our  NEUTRAL  recommendation  and  earnings  forecasts  for  MCIL,  with our  MYR1.06  FV  pegged  to  an  11.7x CY14F P/E, which is the  mean of its 5-year historical P/E trading band.

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Company Profile
Media Chinese International (MCIL) is a leading Chinese-language media platform in Malaysia with presence in China, Hong Kong and North America.

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Source: RHB