- It was announced on
Bursa Malaysia last Friday that resolutions relating to the proposed capital
reduction exercise via a special dividend payout of RM0.41/share (equivalent to
USD0.13 or HKD1.01) has been approved.
- The special
dividend will be paid to the respective shareholders on 28 November 2012. To recap,
this exercise will be funded by a combination of internal funds of RM200mil (equivalent
to US$63mil) and new bank borrowings of RM500mil (equivalent to US$157mil).
- The company now has
a more optimised capital structure with a forecasted gearing level of 28%. The
new bank borrowings of RM500mil will turn MCIL into a net debt position of RM439mil
as at end-FY13F, with an interest cover of 11x.
We project earnings to fall by 9% to account for the new interest
expense arising from the new bank borrowings of RM500mil. As at 1QFY13, net
cash stood at a healthy RM421mil.
- The share price has
rallied by a whopping 21% since July, whereby the RM0.41/share special dividend
has already been priced in by the market. This does not imply a re-rating on
the stock given the recent run-up in share price.
- Inclusive of the
special dividend, ROE is estimated to be at 15%. The stock now trades at a PE
of 15x on FY13F earnings, where dividend yield stands at 30%. Stripping off the
special dividend, we assume a DPS of 6.8 sen, translating into an implied
dividend yield of 4.2%, based on a 63% dividend payout.
- No change to our
earnings assumption at this juncture. We
maintain our BUY recommendation on Media Chinese International (MCIL), with an
unchanged fair value of RM1.70/share (under-review), based on a 10% discount to
our DCF value, pending the release of the 2QFY12 results, which is expected to
be released on 29 November 2012.
- On a side note, the
proposed listing of the group’s travel and travel-related business on the Hong
Kong Stock Exchange – targeted to be completed by end-FY12 – is likely to have
an insignificant impact on its operations as the travel business only accounts
for circa 3% of EBIT as at FY12.
Source: AmeSecurities
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