- We maintain our BUY recommendation on Media Chinese
(MCIL), with a revised fair value of RM1.70/share versus RM1.37/share
previously to reflect a capital reduction exercise pursuant to a special
dividend payout of RM0.41/share.
- MCIL has proposed to undertake the special dividend to
shareholders of RM700mil (US$220mil) or RM0.41 (US$0.13) per share via the capital reduction. Distribution of
cash is expected to complete by 4QCY12. This exercise will be financed by a
combination of internal funds of RM200mil (US$63mil) and new bank borrowings of
RM500mil (US$157mil).
- The exercise is a positive as it seeks to reward
shareholders and enables MCIL to enhance its capital structure. Despite that,
gearing will rise to a manageable level of 28% after accounting for new debt.
As at year-end FY12, net cash totalled RM392mil, which will turn into a net debt
of RM441mil at end-FY13F with interest cover at 11x. Earnings, on the other
hand, would fall by 9% due to interest expense stemming from the new
borrowings.
- Post-capital repayment, MCIL’s ROE is estimated to be at
16%, while projected dividend yield is at 32% after incorporating the special dividend
of RM0.41/share with FCF of RM199mil for FY13F. Without this, yield was only
projected at 4.3%. Notwithstanding this, we maintain our payout ratio at 60%
for FY13F-FY15F.
- We view the capital reduction as an exercise to optimise MCIL’s
balance sheet without excessively burdening its cash flow or earnings
capability, although some investors may be put off by the new borrowings to
fund the exercise.
- MCIL aims to have a full-fledge media platform in the near
term. Given its strong dominance in print, management is actively looking at
other potential media assets such as radio and TV overseas. MCIL targets to expand
overseas, targeting countries with large pockets of Chineselanguage
readers.
- Nevertheless, MCIL will continually invest to grow and
enhance print, given the strong penetration of print as the most effective and
cheapest medium. Furthermore, MCIL would also be focusing on event management
by collaborating with its advertisers. Separately, the upgrading of its
editorial system is underway, with a budgeted capex of RM6mil-7mil. Annual
budgeted capex remains constant at RM30mil.
- Its 1QFY12 results will be released in the next couple of
weeks. We understand that the upcoming Olympics is unlikely to impact much on print. Management expects ad spend to be ramped up
in August arising from the nationwide sales and mooncake festival in September.
- Given that the share price has run up to 25% in the past
week, valuation remains attractive, trading at a PE of 14x. We maintain our BUY
conviction premised on:- (1) Chinese-language newspaper segment commanding 89%
of market share in Malaysia – with four titles under its umbrella; and (2)
Niche market in which Ming Poa Hong Kong
operates, targeting the business and politically-attuned readers.
Source: AmeSecurities
No comments:
Post a Comment