THE BUZZ
The Financial Daily reported that Media Chinese (MCIL) may undertake a capital repayment programme that it may see its shareholders being rewarded with a bumper dividend of 40 sen per share, which works out to a sum of RM680m.
OUR TAKE
Trading in the stock suspended. Trading in MCIL shares was suspended in the afternoon session last Friday but there was no announcement in relation to it. The stock will continue to be suspended today pending a material announcement by the company.
Bonanza for shareholders highly likely. As reported by the daily, we do believe that the company is highly likely to announce some form of capital repayment. However, going by its huge cash pile of RM412.6m or 24 sen per share as of end Mar 2012, we think RM0.40 per share of capital repayment is excessive. If it pays out this amount, the entire sum will come up to RM680m, meaning that the group will need to borrow to do the capital repayment, which we believe is unlikely.
A windfall indeed albeit a smaller one. Pending the material announcement, we are maintaining MCIL as our top pick in the Media sector, as well as our BUY call and FV of RM1.60, based on a 13x FY13 PER. MCIL has always been our favorite owing to its management’s prudent cost control measures and the healthy adex growth in the Chinese newspaper segment. Besides, MCIL has never failed to pay lucrative dividends to its shareholders. For its FY12 ended 31 March, the company paid an 8.1 sen dividend, which translated into a dividend yield of 7% based on a payout ratio of 72%.
Source: OSK
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