Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT
Research House: RHB
Media Chinese International Ltd (MCIL)
(April 7, 87 sen)
Reiterate outperform at 90 sen, fair value raised to RM1.09: MCIL has enjoyed a strong start to the year with its share price up 59.3% year to date (YTD). This has outperformed both the FBM KLCI and FBM100.
We believe the strong share price performance was due to factors such as improving economic conditions, which would generally benefit advertising expenditure (adex), and above-consensus quarterly results.
We also note that ad spending for the Malaysian operations has started on a strong note. According to Nielsen Media Research, YTD gross adex for MCIL's Chinese dailies, namely, Sin Chew, Nanyang, China Press and Guang Ming, grew 20.6% year-on-year (y-o-y).
Apart from a recovery in adex, we believe the strong y-o-y growth is also a reflection of the low base effect as a result of the weak economic conditions a year ago.
Generally, we remain positive on the outlook for ad spending this year. Apart from an economic recovery, we expect adex to also be supported by "ad-friendly" events such as the 2010 FIFA World Cup and the Commonwealth Games among others.
Recall MCIL's 3QFY10 earnings before interest and tax (Ebit) margin for the publishing and printing division expanded by 7% quarter-on-quarter. This was due to stronger ad revenue during the quarter, which would flow straight to operating profit, and ongoing cost-control measures.
The Malaysian operations are currently carrying around six to eight months worth of stock at an average cost of US$530 (RM1,701.30) to US$550 per tonne while the Hong Kong operations have around three months worth of stock at similar cost.
Apart from newsprint, the group's headcount has been reduced by around 4%-5% this year, resulting in staff cost savings of around US$8 million. With two major cost items under control, we think MCIL is poised to benefit from the upswing in ad spend ahead.
Our earnings forecasts remain unchanged. MCIL's trading volume has improved rather significantly of late as more investors start to recognise the group's fast improving fundamentals, in our view.
Given the improved liquidity, we are raising our target CY10 price-earnings ratio (PER) to 13 times from 11 times. Consequently, our indicative fair value has been raised to RM1.09 from 92 sen. - RHB Research Institute, April 7
This article appeared in The Edge Financial Daily, April 8, 2010.
Company Name: MEDIA CHINESE INTERNATIONAL LT
Research House: RHB
Media Chinese International Ltd (MCIL)
(April 7, 87 sen)
Reiterate outperform at 90 sen, fair value raised to RM1.09: MCIL has enjoyed a strong start to the year with its share price up 59.3% year to date (YTD). This has outperformed both the FBM KLCI and FBM100.
We believe the strong share price performance was due to factors such as improving economic conditions, which would generally benefit advertising expenditure (adex), and above-consensus quarterly results.
We also note that ad spending for the Malaysian operations has started on a strong note. According to Nielsen Media Research, YTD gross adex for MCIL's Chinese dailies, namely, Sin Chew, Nanyang, China Press and Guang Ming, grew 20.6% year-on-year (y-o-y).
Apart from a recovery in adex, we believe the strong y-o-y growth is also a reflection of the low base effect as a result of the weak economic conditions a year ago.
Generally, we remain positive on the outlook for ad spending this year. Apart from an economic recovery, we expect adex to also be supported by "ad-friendly" events such as the 2010 FIFA World Cup and the Commonwealth Games among others.
Recall MCIL's 3QFY10 earnings before interest and tax (Ebit) margin for the publishing and printing division expanded by 7% quarter-on-quarter. This was due to stronger ad revenue during the quarter, which would flow straight to operating profit, and ongoing cost-control measures.
The Malaysian operations are currently carrying around six to eight months worth of stock at an average cost of US$530 (RM1,701.30) to US$550 per tonne while the Hong Kong operations have around three months worth of stock at similar cost.
Apart from newsprint, the group's headcount has been reduced by around 4%-5% this year, resulting in staff cost savings of around US$8 million. With two major cost items under control, we think MCIL is poised to benefit from the upswing in ad spend ahead.
Our earnings forecasts remain unchanged. MCIL's trading volume has improved rather significantly of late as more investors start to recognise the group's fast improving fundamentals, in our view.
Given the improved liquidity, we are raising our target CY10 price-earnings ratio (PER) to 13 times from 11 times. Consequently, our indicative fair value has been raised to RM1.09 from 92 sen. - RHB Research Institute, April 7
This article appeared in The Edge Financial Daily, April 8, 2010.
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