We reiterate our BUY recommendation on Media Chinese International
Ltd (MCIL), with a higher DCF-based fair value of RM1.37/share versus
RM1.30/share previously.
MCIL’s 9MFY12 earnings of RM155mil outperformed our full-year
forecast by 4%. Annualised earnings were at 24% above consensus.
We revise upwards our earnings estimates for FY12FFY13F by
25%, owing to stronger-than-expected adex volume moving forward.
MCIL’s 3Q net profit rose 32% QoQ to RM63.1mil, despite a slight
drop in turnover by 4.4%. The improved performance was largely attributed to
robust sales contributed by accelerated
adex spending and cost containment efforts.
So far, 3Q has been the strongest quarter with a 34.9% QoQ
jump in pre-tax profit. Publishing and printing performed well, increasing by
8.7%. Advertising growth was boosted by improvements in volume and rate,
despite the economic uncertainty and advertising volatility in the local market.
On a YoY basis, MCIL recorded a 6% rise in net profit for 9MFY12
due to a higher turnover at 9%. This strong growth was mainly attributable to
advertising revenue from national advertising, property sector and luxury
products and tour revenue especially in the long-haul tours.
We understand that publishing and printing in Hong Kong set
a record for MCIL. Print advert is fully booked for CY12 for a magazine called
“MING Watch” in Hong Kong and China. “MING Watch” is a watch magazine featuring
the latest news on high-end watch trend.
Nevertheless, adex outlook in Malaysia remains healthy, with
the potential election in CY12 to bode well for the sector. Other regional
events such as elections in the US, China, Taiwan, HK and the Olympics would
also support adex spending.
Management expects escalating costs due to inflation, especially
for newsprint price and staff costs. Newsprint price is expected to rise due to
an increasing demand in 1HFY13F as many elections are taking place globally.
We like MCIL due to the group’s monopolistic position within
the Chinese language print segment in Malaysia (87% of market share) and
superior pricing power for adrates – the second highest industry wide.
Source: AmeSecurities
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