May 31, 2011

MEDIAC - Time for a tea break

Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT
Research House: MAYBANK

Media Chinese International Ltd
(May 31, RM1.31)
Downgrade to 'hold' at RM1.30 with revised target price of RM1.40 (from RM1.35)
: MCIL's FY11 results were within expectation. Dividends surprised with 60% net dividend payout ratio (DPR) or 10 percentage points (pps) above expectation. We maintain our earnings estimates but raise our net DPR assumption to 60%, for a decent net dividend yield of 4.7% for FY12. The higher dividends for FY11 will shore up MCIL's share price after the June 1 hike in electricity prices. With only 8% upside potential to our new target price, MCIL is now a 'hold'.

Core net profit for 4QFY11 of RM42.1 million (+19% year-on-year [y-o-y], -23% quarter-on-quarter [q-o-q]) brought FY11 core net profit to RM178.4 million (+33% y-o-y), which was within expectations at 103% of our estimate and slightly above consensus at 106%. Revenue for FY11 of RM1.3 billion (+10% y-o-y) was also within expectation at 102% of our revenue estimate.

Higher advertising expenditure moderated higher newsprint prices. Core net profit growth for FY11 of 33% y-o-y was driven by Malaysian adex, which grew 11% y-o-y while the average newsprint price remained flattish at US$650 (RM1,956.50) per tonne. Core net profit growth of 19% y-o-y for 4QFY11 was driven by Malaysian adex which grew 10% y-o-y, tempered by higher average newsprint price of US$680 per tonne (4QFY10: US$590 per tonne). Q-o-q 4QFY11 core net profit was 23% lower due to seasonally lower adex.

A final net dividend per share (DPS) of 1.2 US cents (3.5 sen) was declared bringing FY11 net DPS to 2 US cents. This implied 60% net DPR or 10 pps above expectations. We maintain our FY12/13 earnings estimates but raise our net DPR assumption to 60%. This translates into decent net dividend yield of circa 5%. Earnings wise, our 5% adex growth assumption going forward will be moderated by higher average newsprint price assumption of US$750 per tonne.

We raise our target price but downgrade the stock to 'hold'. Our new target price is premised on 13.5 times CY12 (rolled forward) earnings per share forecast of 10.5 sen. Our downgrade is tactical as there is now only 8% upside potential and yesterday's 7% hike in electricity tariffs may dampen adex sentiment. We may review our call after observing adex trends post-electricity tariff hike. In the 3'' months since we initiated coverage with a 'buy', MCIL's share price has surged by 49%. ' Maybank IB Research, May 31


This article appeared in The Edge Financial Daily, June 1, 2011.

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