Catcha Media (CHM)’s 9MFY13 core net loss of MYR5.9m was weaker than we expected but this was mainly due to losses from the e-commerce segment and iCar. The publishing and online media businesses did fairly well. CHM will start to recognise the earnings from Says.com in 4QFY13, which may help to improve its profitability. Maintain BUY, with our FV of MYR0.96 unchanged.

- Core net loss worse than expected. CHM’s 9MFY13 reported losses of MYR4.2m were in line with ourestimates but after stripping out the MYR1.7m one-off gain from the disposal of Catcha Digital Asia, the group’s core net loss of MYR5.9m was weaker than we had forecast.  While its publishing and online media businesses showed commendable performance, this was not enough to offset the investment cost incurred by its e-commerce division as it sought to capture market share.

- Rev Asia comes on stream in 4Q. As the group’s merger with online social media platform Says.com was completed on 8 Oct, CHM will start recognising the latter’s revenue contribution in 4Q. We understand that Says.com is profitable; hence its integration into the group would help to enhance CHM’s profitability and expedite its turnaround. Having said that, we are lifting our FY13 core net loss forecast for CHM to -MYR6.5m (from -MYR5.1m) as the losses from e-commerce and share of losses arising from its 29.2% stake in iCar Asia Ltd (ICQ AU, NR) will add to the drag on the group’s bottomline.

- Better FY14 seen. We think CHM’s FY14F’s earnings should improve after its merger with Says.com is completed. That said, intensifying competition in the internet ad space calls for prudence on the stock. We expect CHM’s FY14F bottomline to remain in the red as it may have to incur rising costs as it strives to secure a larger market share.

- Risks. Low barriers to entry for new players and CHM’s high cash burn rate are the key investment risks.

- Maintain BUY, with MYR0.96 FV. We remain positive on CHM’s outlook CHM in view of its merger with Says.com and its ongoing efforts to garner a larger market share. Maintain BUY, with our SOP FV still at MYR0.96.

Source: RHB