- We are downgrading Media Chinese International (MCIL) to a
HOLD, with a lower fair value of RM1.18/share vs. RM1.29/share previously,
based on our DCF valuation, following a weaker-than-expected FY13F adex.
- MCIL reported a weak 3QFY13F with a net profit of RM44mil,
which brings 9MFY13 earnings to RM132mil. This was short of our expectations
covering only 72% of our earlier estimate.
- The shortfall was due to higher operating expenses and weaker
adex sentiment amid the rising general election uncertainty.
- As a consequence, PBT dropped by 10% YoY on the back of flat
– 0.2% decline – in turnover.
- 3Q earnings strengthened 14% QoQ supported by a seasonally
stronger quarter underpinned by the festive season, but weakened by 22% vs. a
year earlier. 4Q revenues grew marginally and were affected by a cut back in advertising
expenditure.
- This was primarily caused by the tightening of government policies
on the local property market in Hong Kong and North America, both of which rely
heavily on advertisers from the property segment. We understand that property
launches have been put on hold.
- Further to that, higher financing costs were recorded in
4Q, attributed to RM500mil borrowings undertaken to finance the special
dividend of 41 sen/share.
- Advertisers are generally cautious and conserving budget based
on a ‘wait-and-see” approach in 1Q.
- As such, we have trimmed and fine-tuned our earnings to pencil
in a slower-than-expected adex as well as election jitters. We now project
FY13F earnings to slide by 10% and rise by 7%-13% over FY14F-FY15F.
- But, management sees the upcoming General Election to potentially
recoup the shortfall.
- No dividend was declared. To-date, dividends declared amount
to 43.1 sen/share. Excluding special divided and at 6.3 sen/share, the yield
stands at 5.7%.
- On a side note, the proposed spin-off of the
travel-related business on the Hong Kong Stock Exchange is still on-going and
is targeted to be completed by end-FY13F. This is unlikely to have any
significant impact given that it only accounts for circa 3% of EBIT.
- At the current level, the stock is trading at 11x of FY13F
earnings.
Source: AmeSecurities
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