MEDIAC (5090) - MCIL confident of strategy to expand its digital platforms
April 14, 2015 : 10:38 AM MYT
Media Chinese International Ltd
(April 13, 67.5 sen)
Maintain market perform, with a revised target price of 66 sen from 68 sen previously. Media Chinese International Ltd (MCIL) management indicated that its gross advertising expenditure (adex) has shown a positive month-on-month growth in March, thanks to the pre-goods and services tax (GST) fever which boosted consumer spending, but is expected to soften thereafter (for at least one to two quarters) post-GST implementation. Despite the gloomy adex outlook, the group believes its financial year 2016 (FY16) adex revenue will merely weaken by a low single digit (in-line with our -3.4% year-on-year [y-o-y] expectation) due to its diversified adex revenue mix. Note that half of MCIL’s adex revenue is contributed by classified ads, which are non-cyclical and defensive in nature, with the remaining balance contributed by casual/agency ads that are largely affected by the macro environment. MCIL’s year-to-date (YTD) February gross adex softened by 1.4% y-o-y against the country’s overall gross adex (ex-Pay TV segment) of -4.7% y-o-y and the newspaper segment of -5.1% y-o-y.
The current weak newsprint prices trend is expected to continue over the short term, in view of the weaker exchange rates for some of the major global supplying countries, prolonged excess supply issues, and slower demand as a result of the ongoing shifts from print to digital advertising. The benchmarked 45 grams per square metre (gsm) Hong Kong newsprint price has started to deteriorate progressively since mid-2013 from US$620 (RM2,294)/tonne to the currently less than US$500/tonne level. Moving forward, RISI, a leading information provider for the global forest products industry, is expecting the price to climb marginally (by about US$10 to US$30/tonne) in the second quarter of calendar year 2015 (2QCY15) and stabilise thereafter due to the potential lower supply as a result of the current poor margins. The soft price trend has reduced MCIL’s newsprint cost significantly to a low of US$500/tonne (vs US$600/tonne a year ago) with nine-month inventory; thus, prompting us to reduce our FY16 newsprint cost assumption to US$550/tonne from US$600/tonne previously. We understand that the group also expects to save about RM11 million to RM15 million annually in its print cost following the conversion of paper material from 45gsm to 42gsm in late 2015.
The ringgit has continued to weaken against the US dollar, which prompted our in-house CY15 US$/RM forecast to be revised to RM3.57 recently. We have also revised our FY16 US$/RM exchange rate assumption accordingly to RM3.54, which neutralised the positive impact from lower newsprint prices.
MCIL appeared confident of its forward strategy to expand its digital platforms. Of late, the group has tied up with Star Publications (M) Bhd by bundling both e-papers at RM199/year (where the e-paper revenue will split equally). On top of that, MCIL’s ecommerce portal “Login” and online video portal “Pocketimes”, which were launched in late 2014 are expected to bode well for advertisers in view of the rising popularity of digital platforms. — Kenanga Research, April 13
http://www.theedgemarkets.com
April 14, 2015 : 10:38 AM MYT
Media Chinese International Ltd
(April 13, 67.5 sen)
Maintain market perform, with a revised target price of 66 sen from 68 sen previously. Media Chinese International Ltd (MCIL) management indicated that its gross advertising expenditure (adex) has shown a positive month-on-month growth in March, thanks to the pre-goods and services tax (GST) fever which boosted consumer spending, but is expected to soften thereafter (for at least one to two quarters) post-GST implementation. Despite the gloomy adex outlook, the group believes its financial year 2016 (FY16) adex revenue will merely weaken by a low single digit (in-line with our -3.4% year-on-year [y-o-y] expectation) due to its diversified adex revenue mix. Note that half of MCIL’s adex revenue is contributed by classified ads, which are non-cyclical and defensive in nature, with the remaining balance contributed by casual/agency ads that are largely affected by the macro environment. MCIL’s year-to-date (YTD) February gross adex softened by 1.4% y-o-y against the country’s overall gross adex (ex-Pay TV segment) of -4.7% y-o-y and the newspaper segment of -5.1% y-o-y.
The current weak newsprint prices trend is expected to continue over the short term, in view of the weaker exchange rates for some of the major global supplying countries, prolonged excess supply issues, and slower demand as a result of the ongoing shifts from print to digital advertising. The benchmarked 45 grams per square metre (gsm) Hong Kong newsprint price has started to deteriorate progressively since mid-2013 from US$620 (RM2,294)/tonne to the currently less than US$500/tonne level. Moving forward, RISI, a leading information provider for the global forest products industry, is expecting the price to climb marginally (by about US$10 to US$30/tonne) in the second quarter of calendar year 2015 (2QCY15) and stabilise thereafter due to the potential lower supply as a result of the current poor margins. The soft price trend has reduced MCIL’s newsprint cost significantly to a low of US$500/tonne (vs US$600/tonne a year ago) with nine-month inventory; thus, prompting us to reduce our FY16 newsprint cost assumption to US$550/tonne from US$600/tonne previously. We understand that the group also expects to save about RM11 million to RM15 million annually in its print cost following the conversion of paper material from 45gsm to 42gsm in late 2015.
The ringgit has continued to weaken against the US dollar, which prompted our in-house CY15 US$/RM forecast to be revised to RM3.57 recently. We have also revised our FY16 US$/RM exchange rate assumption accordingly to RM3.54, which neutralised the positive impact from lower newsprint prices.
MCIL appeared confident of its forward strategy to expand its digital platforms. Of late, the group has tied up with Star Publications (M) Bhd by bundling both e-papers at RM199/year (where the e-paper revenue will split equally). On top of that, MCIL’s ecommerce portal “Login” and online video portal “Pocketimes”, which were launched in late 2014 are expected to bode well for advertisers in view of the rising popularity of digital platforms. — Kenanga Research, April 13
http://www.theedgemarkets.com
