MEDIAC (5090) - Media Chinese Int'l - Printing less money
Target RM0.72 (Stock Rating: HOLD)
Media Chinese Int’l (MCIL)’s 9MFY15 core net profit was in line with our and consensus expectations, at 79% and 78% of full-year estimates, respectively. Core net profit in 9MFY15 fell by 26.4% yoy due to persistent weakness in the printing and publishing segment. As expected, there was no dividend declared in the quarter. We maintain our FY15-17 EPS forecasts as we expect a sequential decline in the group’s earnings, partly due to seasonal weakness in adex spending in the current quarter. We expect advertising spending to stay weak ahead of the GST implementation, and only recover in 2H15 as concerns subside. We maintain Hold, with an unchanged RM0.72 target price, based on 9x CY16 P/E, still at a 40% discount to our target market P/E of 15x. Switch to Astro for better exposure to the media sector.
Persistent weakness in print and publishing
Revenue in 9MFY15 fell by 7.3% yoy from RM1.29bn to RM1.2bn mainly due to lower printing and publishing revenue contributions from all geographical segments. Printing sales in Malaysia, which contributed about 56% of group revenue, fell by 10.3% from RM757.1m to RM679m due to negative impacts from weak consumer sentiment on the back of the pending Goods and Service Tax (GST) implementation, and one of the country’s worst-ever floods in Dec 2014. We expect the print segment contribution to continue to decline due to changes in consumer preference in favour of digital and online media.
Structural challenge remains
We believe MCIL’s recent ventures into e-commerce will help the company diversify its exposure from its high dependence on print (78% of the group’s 9MFY15 revenue) to a greater presence in the digital segment. However, the new division would require a longer gestation period amid fierce market competition and its limited experience in e-commerce trading. Management plans to remains conservative with its cash management in view of the challenging operating outlook and potentially lower earnings contribution. Despite this, we expect MCIL to benefit from the lower newsprint price environment and various cost-saving exercises instituted by management.
We maintain Hold
The stock offers a decent FY15-16 yield of 4.3-6.1%. However, we prefer Astro for better exposure to the media sector.
Source: CIMB Daybreak - 27 February 2015
Target RM0.72 (Stock Rating: HOLD)
Media Chinese Int’l (MCIL)’s 9MFY15 core net profit was in line with our and consensus expectations, at 79% and 78% of full-year estimates, respectively. Core net profit in 9MFY15 fell by 26.4% yoy due to persistent weakness in the printing and publishing segment. As expected, there was no dividend declared in the quarter. We maintain our FY15-17 EPS forecasts as we expect a sequential decline in the group’s earnings, partly due to seasonal weakness in adex spending in the current quarter. We expect advertising spending to stay weak ahead of the GST implementation, and only recover in 2H15 as concerns subside. We maintain Hold, with an unchanged RM0.72 target price, based on 9x CY16 P/E, still at a 40% discount to our target market P/E of 15x. Switch to Astro for better exposure to the media sector.
Persistent weakness in print and publishing
Revenue in 9MFY15 fell by 7.3% yoy from RM1.29bn to RM1.2bn mainly due to lower printing and publishing revenue contributions from all geographical segments. Printing sales in Malaysia, which contributed about 56% of group revenue, fell by 10.3% from RM757.1m to RM679m due to negative impacts from weak consumer sentiment on the back of the pending Goods and Service Tax (GST) implementation, and one of the country’s worst-ever floods in Dec 2014. We expect the print segment contribution to continue to decline due to changes in consumer preference in favour of digital and online media.
Structural challenge remains
We believe MCIL’s recent ventures into e-commerce will help the company diversify its exposure from its high dependence on print (78% of the group’s 9MFY15 revenue) to a greater presence in the digital segment. However, the new division would require a longer gestation period amid fierce market competition and its limited experience in e-commerce trading. Management plans to remains conservative with its cash management in view of the challenging operating outlook and potentially lower earnings contribution. Despite this, we expect MCIL to benefit from the lower newsprint price environment and various cost-saving exercises instituted by management.
We maintain Hold
The stock offers a decent FY15-16 yield of 4.3-6.1%. However, we prefer Astro for better exposure to the media sector.
Source: CIMB Daybreak - 27 February 2015
