Target prices for media firms cut

Stock Name: MEDIA
Company Name: MEDIA PRIMA BHD

Research House: KENANGA

Price Call: HOLD

Target Price: 2.40

Stock Name: STAR
Company Name: STAR PUBLICATIONS (M) BHD

Research House: KENANGA

Price Call: HOLD

Target Price: 3.28

Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT

Research House: KENANGA

Price Call: HOLD

Target Price: 1.33

Kenanga Research cut target prices for Malaysian media companies including Star Publications Bhd and Media Prima Bhd on expectations the weaker ringgit against the US dollar could crimp future earnings.

The research house kept a "neutral" call on the Malaysian media sector on firm gross advertising expenditure.

But it cut target prices for Media Prima Bhd to RM2.40 (US$0.76) per share from RM2.62 and Star Publications Bhd to RM3.28 from RM3.40.

Kenanga also cut its target price for Media Chinese International Ltd to RM1.33 per share from RM1.36. -- Reuters

Media - NEUTRAL - 28 March 2012

Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT

Research House: KENANGA

Price Call: BUY

Target Price: 1.30

Stock Name: STAR
Company Name: STAR PUBLICATIONS (M) BHD

Research House: KENANGA

Price Call: HOLD

Target Price: 3.40

Stock Name: MEDIA
Company Name: MEDIA PRIMA BHD

Research House: KENANGA

Price Call: HOLD

Target Price: 2.72

We are maintaining our NEUTRAL view on the media sector.Post 4QCY11 results, media companies have started to change their bearish viewsto being more optimistic given the improved outlook for both consumers andadvertisers. Despite the first two months gross adex  seeing a contraction of -1.7% YoY, we arekeeping our full year +11.1% YoY growth forecast unchanged for now. There is nochange in our earnings forecasts for media companies under our coverage. We aremaintaining Media Chinese International ('MCIL') target price of RM1.30 with anOUTPERFORM recommendation while keeping MARKET PERFORM ratings on both Star Publications('Star')  and Media Prima ('MPR') withunchanged target prices of RM3.40 and RM2.72 respectively, 

CY11 resultssnapshot.  Most of the media companyresults under our coverage came in above ours and the street expectations. Themain culprits were due to better costs efficiency and higher-than-expectedsales as a result of seasonal factors. In view of their encouraging results,especially for the latest quarter, media companies have started changed theirbearish views to being more optimistic given the  improved outlook for both consumers and advertisers.Dividend-wise, Star declared a total 18.0 sen in FY11, which translated into a dividendpayout ratio of 71%, and in line with its dividend payout policy of 70%-80%.MPR on the other hand declared a total full year dividend of 16.0 sen. Thistranslated to a dividend payout ratio of 91.8% and exceeded the company policy,which sets its payout policy at between 25%-75% of PATAMI. No dividend wasdeclared by MCIL as expected given that the company tends to declare it on abiannual basis. 

Adex gathers momentumin FY11 but soften in the first two months of 2012. The country's mediagross adex gained momentum and recorded a rise of 11.9% YoY to RM10.8b (including  Pay-TV segment)  in  CY11, thanks to the TV and newspapers' segments, which jumped by 13.3% and11.9% to RM5.5b and RM4.4b respectively. For the YTD adex (until February),  it has  softened  by -1.7%  YoY  to RM1.41b  as  a result  of  lower free-to-air  TV  and newspapers adex, which fell by 10.6% and2.0% to RM365m and RM596m respectively. The slowdown in our view was mainly dueto a shorter pre-Chinese New Year advertising period and advertisers conservingtheir A&P budget as they renegotiate ad rates with media owners.  All the media companies are currentlyexpecting the country's overall gross adex to grow at a high single digit inCY12 as compared to our low double digit growth expectation. We expect grossadex at RM11.9b, or +11.1% YoY growth, based on 2.3x GDP multiplier (average ofthe past two GE years).                                     

The Malay printmarket adex share exceeded that of the Chinese in FY11, in line with thegrowing readership in the Malay segment according to Nielsen MediaResearch.  The research outfit indicatedthat the Malay print market adex share has increased to 31% (FY10: 26%),overtaking the 29% share (FY10: 30%) of the Chinese segment. English languageon the other hand continued to dominate the print market share with a 40%share, although this is lower than its 44% share in the preceding quarter(figure 1 & 2). 

Newsprint costhovering at an expected trading range. Newsprint price is currently trading at around USD650-670/MT, in linewith the industry players' expectation, and is expected to hover at the currentlevel during 1HCY12 as a result of deteriorating newspaper pulp price.Nevertheless, industry players are expecting the newsprint price to trendhigher in 2H due to potential higher demand from North America. MCIL iscurrently holding a 6 to 8-month newsprint inventory with an average cost ofUSD700/MT. New Straits Times and Star, on the other hand, are currently holding8-month and 12-month newsprint inventories respectively (the highest among theindustry), with an average cost of USD720/MT and slightly below USD700/MTrespectively. We have imputed an average of USD700/MT, USD720/MT and USD700/MTnewsprint cost assumptions for MCIL (for FY13), MPR and Star respectively.        

Source: Kenanga

Media (Neutral NEW) - 2012 to be a quiet year

Stock Name: MEDIA
Company Name: MEDIA PRIMA BHD

Research House: HLG

Price Call: SELL

Target Price: 2.34

Stock Name: STAR
Company Name: STAR PUBLICATIONS (M) BHD

Research House: HLG

Price Call: HOLD

Target Price: 3.27

Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT

Research House: HLG

Price Call: HOLD

Target Price: 1.26

Media (Neutral NEW)

2012 to be a quiet year

• Adex growth to moderate' Jan-12 Adexfell by -10.2% YoY, continuing the downwards trend in Adex growth.
• We believe that Adex growth will only pick up when there is more clarityon the global macro outlook, which in turn will reinforce confidence inbusinesses to invest in Adex.
• Newspaper Adex dominates' The overallAdex market is worth ~RM8.3bn and newspaper medium still commands the lionshare, making up ~53%.
• TV Adex is catching up' The nextbiggest Adex market is the FTA TV segment with 36% (~RM3bn) of the total Adexmarket. FTA TV Adex has been gradually increasing its share in the industryover the years because of growing affluence in the population whereby ~90% ofthe ~6.1m Malaysian household owns a TV.
• With slowing Adex growth and lack of confidence within the businesscommunity to commit on additional Adex spending, we are NEUTRAL on the sector.
• Hence, we initiate coverage on:
• Media Prima with aSELL at TP: RM2.34;
• Star with a HOLD atTP of RM3.27; and
• MCIL with a HOLD atTP of RM1.26

Source: HLIB Research 6 March 2012

Media Chinese Intn'l - Strong adex spending BUY

Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT

Research House: AMMB

Price Call: BUY

Target Price: 1.37

We reiterate our BUY recommendation on Media Chinese InternationalLtd (MCIL), with a higher DCF-based fair value of RM1.37/share versusRM1.30/share previously.

MCIL's 9MFY12 earnings of RM155mil outperformed our full-yearforecast by 4%. Annualised earnings were at 24% above consensus. 

We revise upwards our earnings estimates for FY12FFY13F by25%, owing to stronger-than-expected adex volume moving forward.

MCIL's 3Q net profit rose 32% QoQ to RM63.1mil, despite a slightdrop in turnover by 4.4%. The improved performance was largely attributed torobust sales contributed  by acceleratedadex spending and cost containment efforts.

So far, 3Q has been the strongest quarter with a 34.9% QoQjump in pre-tax profit. Publishing and printing performed well, increasing by8.7%. Advertising growth was boosted by improvements in volume and rate,despite the economic uncertainty and advertising volatility in the local market. 

On a YoY basis, MCIL recorded a 6% rise in net profit for 9MFY12due to a higher turnover at 9%. This strong growth was mainly attributable toadvertising revenue from national advertising, property sector and luxuryproducts and tour revenue especially in the long-haul tours. 

We understand that publishing and printing in Hong Kong seta record for MCIL. Print advert is fully booked for CY12 for a magazine called'MING Watch' in Hong Kong and China. 'MING Watch' is a watch magazine featuringthe latest news on high-end watch trend.

Nevertheless, adex outlook in Malaysia remains healthy, withthe potential election in CY12 to bode well for the sector. Other regionalevents such as elections in the US, China, Taiwan, HK and the Olympics wouldalso support adex spending.

Management expects escalating costs due to inflation, especiallyfor newsprint price and staff costs. Newsprint price is expected to rise due toan increasing demand in 1HFY13F as many elections are taking place globally.

We like MCIL due to the group's monopolistic position withinthe Chinese language print segment in Malaysia (87% of market share) andsuperior pricing power for adrates ' the second highest industry wide.

Source: AmeSecurities

MEDIAC (FV RM1.54 - BUY) 9MFY12 Results Review: Commendable Set of Results

Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT

Research House: OSK

Price Call: BUY

Target Price: 1.54

Media Chinese (MCIL) recorded a record high 9MFY12 earningsof RM150m which were above both our and consensus estimates at 81% and 91%of  the full year forecasts respectively.We continue to like  its prospects goingforward and foresee 2012 to be another record breaking year for  the group. While there were no dividendsdeclared for this quarter, we believe that it will declare its dividend in 4Qconsidering its huge cash pile of RM384m as at Dec 2011.   Reiterate BUY with our FV upgraded to RM1.54from RM1.47 previously, based on an unchanged 13x CY12 PER.

The Best So Far.In line with our previous guidance in our report titled 'Another Record Year inThe Making' published 14 Feb 2012, MCIL posted its strongest YTD results ever withits 9MFY12 top and bottom line standing at RM1.15bn (+8% y-o-y) and RM150m (+11%y-o-y). It marked its best quarter ever in 3QFY12 with earnings coming in at RM61mthanks to better showing from its Hong Kong operations which improved 20% y-oyand 37% q-o-q to RM79m as well as sturdy contribution from its Malaysia corebusiness with growth  being driven by itscore print business, with advertising revenue chalked up10% y-o-y and 13% q-o-qgrowth. MCIL's travel segment also grew 18% y-o-y and 19% YTD with a strongsurge in demand for its long-haul tours to destinations such as Europe andAustralia owing to the year-end festive season and Christmas holidays. Marginsfor the group were sequentially higher q-o-q, with  an expansion of 600bps at  both PBT and EBIT level owing to management'sexcellent cost control efforts. 

Positive trend topersist. Moving into 4QFY12, we foresee that the group will continue to reporthealthy growth, on the back of aggressive advertising and promotion activities amonghypermarkets and fast-moving consumer good companies during the Chinese New Yearperiod in Jan 2012. We  expect thepositive trend to persist going into FY13 as management ramps up its efforts tobetter manage overhead and operating expenses. In addition, newsprintprices  ' which are currently hovering atUSD650-USD680/mt ' are likely to remain stable and upcoming major events, suchas the nation's impending General Election, the 2012 Olympics and Euro2012  sports tournaments will provide a boostto the sector's adex growth.

BUY. We continueto like MCIL  which remains as the topbuy within our media sector coverage. With earnings beating our and consensusestimates, we are upgrading our top and bottom line by 1%-5% for both FY12 andFY13. Hence, our FV is now upgraded to RM1.54 (from RM1.47 previously) based onan unchanged 13x CY12 PER. Though there were no declaration of dividends thisquarter, we believe the group will continue to reward its shareholders givenits mounting cash pile, which stood at RM384m as at Dec 2011. Thus, we continueto impute a payout ratio of 60% for FY12 and FY13, which translates into anappealing yield of 5.7% and 6.1%. Maintain BUY

Source: OSK188 

Media Chinese Int'l - Record quarter in HK but it's not sustainable

Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT

Research House: CIMB

Price Call: HOLD

Target Price: 1.21

Target RM1.21

MCIL's 3QFY3/12 was seasonally strong as all major publishing titles showed ad revenue growth. But this may not be repeated as the HK print adex market is going into a lull after the peak CNY period.

Source: CIMB Daybreak February 29, 2012, Full PDF Report

Media Chinese International: Maintain Sell - Good quarter but slowdown evident

Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT

Research House: MAYBANK

Price Call: SELL

Target Price: 0.98

Raise TP to RM0.98 (+9% YoY) but maintain Sell. MCIL's earnings exceeded expectations for another quarter. We revise our FY13-15 earnings estimates upwards by 8%-9% p.a. on slightly less pessimistic assumptions. That said, we are mindful that its YoY adex growth has slowed markedly, from low double digits in percentage terms in 2QFY12 to mid-single digits in 3QFY12. In addition, we understand that its Jan 2012 gross adex contracted by 3% YoY.


Maybank Research 29 Feb 2012

Click here for full report

Another Record Year in The Making

Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT

Research House: OSK

Price Call: BUY

Target Price: 1.47

RHBInvest Research Highlights 13th January 2012

Stock Name: CSCSTEL
Company Name: CSC STEEL HOLDINGS BERHAD

Research House: RHB

Price Call: BUY

Target Price: 1.41

Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT

Research House: RHB

Price Call: SELL

Target Price: 1.00

Stock Name: SAPCRES
Company Name: SAPURACREST PETROLEUM BHD

Research House: RHB

Price Call: BUY

Target Price: 4.50

13th January 2012

 

Top Story

CSC Steel ' Profitability remains a challenge, '                                                                    Trading Buy (Upgraded) Visit Note -          We estimate CSC Steel is likely to record a net loss of RM10-15m in the upcoming 4Q11 results due to narrowing margins as well as a write-down in inventory value. -          CSC Steel has a huge cash reserve of RM213.5m, or about 56sen/share (as at 30 Sep 2011). At RM1.41, it would only cost the controlling shareholder about RM295m to buy out all minority shareholders, and this amount could be substantially funded with CSC Steel's cash reserve.

Sector Update

Media ' Expect adex growth to moderate in 2012                                                                                                                          Underweight Sector Update -          As the pace of overall adex growth continues to moderate due to weak global economic conditions, we reiterate a slowdown in adex growth to 3.6% in 2012 from 9% projected for 2011.  -          Elections in 2012 will have a positive though not significant impact on adex. -          Due to its recent share price appreciation, we downgrade MCIL to Underperform, while maintaining a fair value of RM1.00. Maintain Underweight on the sector due to lack of catalysts. -          Related story : Media Sector Update ' Nov Sees Weakest Adex Growth So Far (22 Dec 2011)

 

Corporate Highlights

SapuraCrest ' New subsea construction contract                                                                                                                       Outperform News Update -          Yesterday, the company announced that it had entered into a contract with IHC Offshore and Marine B.V. for the construction of two 550-tonne-pipelay-support-vessels (PLSV) at an undisclosed fixed lump sum. The two vessels are expected to be completed and delivered by May and Aug of 2014 respectively and will be utilised specifically for the Petrobras contract, which it won in Nov-11. Maintain fair value of RM4.50/share and Outperform call on stock. -          Related story: News Update - Buying Two New Pipelay Barges (23 Sep 2011) & News Update- Taking Home A Brazilian Win (2 Nov 2011)

Media Chinese Int'l Ltd (Sell): Strong results, but challenging outlook

Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT

Research House: MAYBANK

Price Call: SELL

Target Price: 0.90

Decent results but caution ahead. Media Chinese International Limited's (MCIL) 1HFY12 results were within expectations. It is confident of a decent 3QFY11 but like other media companies, it is cautious of its CY2012 outlook. Maintain Sell call and RM0.90 TP as we believe that there is still downside risk to our adex forecasts.

Maybank research (29 November 2011)

Click here for full report

Within expectations

Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT

Research House: ECMLIBRA

Price Call: HOLD

Target Price: 1.00

Softer advertising expenditure in September

Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT

Research House: RHB

Price Call: HOLD

Target Price: 1.00

Media sector
Maintain underweight
As expected, September's gross advertising expenditure (adex) for TV and print media combined showed a sequential monthly contraction of 18.1%, following the bumper August adex (due to Hari Raya and Merdeka festivities), according to Nielsen Media Research (NMR). On year-on-year (y-o-y) basis, adex growth moderated to 5.1% in Septemebr (August: +9.7% y-o-y).

Print: Bearing in mind the ad rate hike effective January 2011, the print media showed positive y-o-y growth of 7% in September, although it has moderated (August: +14.1% y-o-y). On a month-on-month (m-o-m) basis, the print media contracted 21.2%, surprisingly due to the Malay dailies' 37.5% m-o-m contraction. Prior to September, the Malay dailies' adex growth has been quite strong since February, with a monthly sequential growth of 15.5%, compared with English (8.5%) and Chinese (5.8%) dailies.

Media Chinese International Ltd's (MCIL) newspapers recorded stronger y-o-y numbers across the board, compared with other Chinese dailies. Star Publications (M) Bhd had a relatively decent month as adex grew 1.8% y-o-y (-7.1% m-o-m).

TV: TV adex in September moderated further since July with only 2.9% y-o-y growth (August: +4.4% y-o-y), mainly supported by strong numbers from TV3 and 8TV. Collectively, adex for Media Prima's channels held up quite well with 8.6% y-o-y growth (-12.1% m-o-m). In comparison, TV1 and TV2 combined recorded -27.5% y-o-y growth (-26.5% m-o-m).

For the remainder of 2011, we expect adex growth to moderate further due to lack of festivities or big events and a high base effect in 4Q10. Looking at 2008 elections, a snap election before 2012 will have a positive though not significant impact on the 2011 adex. Also, global economic uncertainties have resulted in advertisers being more prudent on ad spend. Year to date, adex grew 11%. For now, we maintain our projected 2011 adex growth of 9%, and expect adex growth to slow down to 3.6% in 2012.

The risks include: 1) stronger-than-expected consumer spending and demand (and hence, adex), possibly due to a faster-than-expected recovery in the global economy, among others; 2) lower-than-expected newsprint/content costs; and 3) stronger-than-expected ringgit vs the US dollar.

No change to our earnings forecasts. Maintain 'underweight' on the sector. We believe the sector lacks catalysts as adex growth may weaken further if a double-dip global economic recession materialises. Historically, we note that the GDP multiplier effect on adex growth weakens (potentially deteriorating by as much as half) when GDP growth softens. ' RHB Research, Oct 31


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

Media sector to see strong adex growth

Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT

Research House: OSK

Price Call: BUY

Target Price: 1.51

Stock Name: MEDIA
Company Name: MEDIA PRIMA BHD

Research House: OSK

Price Call: BUY

Target Price: 3.09

The media sector is expected to end the
year with a stronger performance as advertisement expenditure (ADEX) is
projected to close at double-digit growth.
OSK Research said according to the New York-based global marketing research
firm AC Nielsen, as of July, the ADEX jumped 12 per cent year-on-year to RM4.7
billion on the back of resilient advertising spending.
"For both the television and newspaper segments, the ADEX grew by nine per
cent and 14 per cent respectively year-to-date," it said in a research note
today.
The research house also believes that the sector will be among the
beneficiaries if a national poll is called in the second half of this year,
coupled with the major festive seasons ahead.
"We see strength in the sector's earnings as the ADEX is likely to close the
year at two to three times our GDP forecast," it said.
For 2011, OSK Research has forecast the GDP growth to grow 5.3 per cent.
It said, should investors' fear of a global economic meltdown
materialise and spark a sell-off in commodities, newspaper publishers may
benefit in terms of cost savings from newsprint, boosted by the current weakness
in the US dollar versus the ringgit.
OSK Research remains cautiously optimistic of the media sector based on the
stated factors.
It reiterated an "overweight" call on the sector and included weaker
newsprint prices and a continued downtrend in the dollar against the ringgit as
the key re-rating catalyst.
OSK Research also said its top pick of the sector were Media Chinese
International Ltd and Media Prima Bhd.
Media Chinese International Ltd holds a fair value (FV) of RM1.51, given
its current attractive valuation and generous yield of six per cent.
Media Prima Bhd has a fair value of RM3.09 on account of its rejuvenated
print media business and diversified exposure across all media platforms. -- Bernama

1QFY11: Within expectation

Stock Name: MEDIAC
Company Name: MEDIA CHINESE INTERNATIONAL LT

Research House: ECMLIBRA

Price Call: BUY

Target Price: 1.34

MEDIAC - On a solid footing

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

Media Chinese International Ltd
(May 31, RM1.31)
Maintain buy at RM1.30 with revised target price of RM1.60 (from RM1.45): We reiterate our 'buy' recommendation on Media Chinese International Ltd (MCIL) and raise our fair value from RM1.45 to RM1.60 (25% discount to our discounted cash flow-based fair value), post: (i) the rolling forward of our valuation base year to FY12F; and (ii) a 1% to 2% marginal upward adjustment to our earnings per share forecast on FY11 full-year results.

MCIL posted a net profit of RM166 million (year-on-year [y-o-y]: 33%) for the 12 months ended March 31, 2011, coming in well within both our forecast sof RM171 million and consensus estimates.

However, the group's earnings would have outperformed our forecast by 5%, if not for an impairment charge on the goodwill of a subsidiary amounting to RM12.5 million. We understand the impairment on the intangible asset was related to one of the group's local newspapers. We are not overly concerned as management has assured this would be a one-off.

As expected, 4QFY11 net profit was sequentially lower, down 46% quarter-on-quarter (q-o-q) to RM30 million owing to a seasonally quieter period as advertisers cut back advertising expenditure after major festivities, in line with the group's historical trend.

MCIL's commendable earnings for FY11 were attributable mainly to stronger publishing and printing revenues which rose 19% year-on-year (y-o-y) on the back of robust adex and stable circulation across the three markets, with y-o-y top line growth of 18% in Malaysia and Southeast Asia, 19% in North America and 6% in Hong Kong and mainland China.

The better performance was also driven by the travel division which swung back into the black with earnings before interest and tax (Ebit) of RM2 million, thanks to rising demand for tours to Europe and North America. Operations in Malaysia and Southeast Asia remained the main earnings driver, at circa 88% of group Ebit.

Management declared a second interim dividend of 1.153 US cents per share (approximately 3.48 sen per share). This brings total dividends to 5.91 sen per share for FY11, translating into a dividend payout ratio of 60%.

We continue to like MCIL for its monopolistic position within the Chinese-language newspaper segment in Malaysia (87% market share) and superior pricing power for lucrative ad rates ' second highest industry-wide. The main risks to our earnings forecast include: (i) bigger than expected surge in newsprint costs; and (ii) lower than expected adex growth. ' AmResearch, May 31


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

MEDIAC - Ride the MCIL dragon

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

Media Chinese International Ltd
(Feb 16, 88 sen)
Initiate coverage with buy call at 87.5 sen and target price RM1.22: We like Media Chinese International (MCIL) for its dominance in the Chinese newspaper segment. With a growing circulation, it will be able to capture a larger share of newspaper adex. Trading at an attractive 10 times CY11 PER (lowest among the media stocks) and offering a decent 5.3% net dividend yield (highest among peers), MCIL offers value. Investors can also expect M&A or higher dividends for more upside potential.

MCIL is a Chinese language newspaper and magazine publisher. Its Malaysian newspapers command more than 70% share of daily circulation of Chinese newspapers.

In Hong Kong, Ming Pao Daily News has the third highest daily circulation. With Yazhou Zhoukan, it is highly regarded for being credible and independent.

Malaysia contributes more 60% to revenue but more than 90% to earnings before interest, tax, depreciation and amortisation (Ebitda).

Daily circulation of its Malaysian newspapers has been growing steadily at 2% four-year compound annual growth rate, while all the other major mainstream newspapers have been experiencing otherwise. In a virtuous cycle, stronger daily circulation will allow MCIL to capture a larger share of newspaper adex. In fact, figures provided by Nielsen Media Research indicate that MCIL's Malaysian Chinese gross newspaper adex rose by an astounding 20% year-on-year in 2010.

Our target price is based on modest 13.5 times CY11 PER, backed by RM1.25 discounted cash flow per share. MCIL's current valuation is even below minus one standard deviation of Media Prima Bhd and Star Publications (M) Bhd's mean PERs. This is despite MCIL catching up in earnings and even better in operations.

Also, MCIL offers higher net dividend yields than Media Prima and Star.

We estimate that MCIL's net cash position will burgeon to RM188.1 million or 11 sen per share by the financial year-end. Management has expressed interest in expanding its global reach before. Otherwise, it can raise the high range of its net dividend payout policy (DPR) from 60% to even as high as 75% (the low range is 30%). Our forecasts assume 50% payout. ' Maybank IB Research, Feb 16


This article appeared in The Edge Financial Daily, February 17, 2011.

MEDIAC - MCIL raises ad rates for Sin Chew, China Press

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

Media Chinese International Ltd
(Feb 2, 87.5 sen)
Maintain outperform at 87 sen with fair value at RM1.20: We recently paid management a visit and set out below the key takeaways from the visit.

According to management, the company has raised its ad rates by 3%-5% for some of its newspapers. Ad rates for both Sin Chew and China Press were revised up by 5% while for Nanyang and Guang Ming, ad rates were maintained. For its Hong Kong publications, management has revised the ad rates by 3%. Management added that 2011 adex is off to a good start thanks to the Chinese New Year celebrations, which spurred advertising demand from hypermarkets and beer companies.

We understand that Nanyang had been repositioned last November and is now more business-focused. The response thus far, according to management, has been encouraging. While still early days, we note that 4QCY10 adex for Nanyang grew 26.8% year-on-year (y-o-y) and 13.4% quarter-on-quarter (q-o-q), although this could also be explained by factors such as economic recovery (y-o-y growth) as well as seasonality (q-o-q growth). Nevertheless, if the repositioning exercise is successful, this could help arrest Nanyang's declining adex market share, which slipped to 5.8% in 2010 versus 6.1% in 2009 and 7% in 2008.

Newsprint prices have been on an uptrend since 2HFY10 and are currently hovering around US$720 (RM2,182) to US$780 per tonne. However, this is still significantly lower than newsprint prices of US$925-US$950/tonne in early-4Q08.

In mitigation, the weakening US dollar versus the ringgit would work to the advantage of the print media players given that newsprint is priced in US dollar. MCIL is currently carrying about six to eight months worth of stock at an average cost of US$650-US$680/tonne and in order to mitigate the rising newsprint price, the management is looking at reducing newsprint usage (as newsprint accounts for 30% to 40% of production cost) through pagination control and managing wastage more effectively.

The risks include: 1) weaker-than-expected adex; 2) higher-than-expected newsprint costs; and 3) a depreciating ringgit versus the US dollar.

As we have forecast FY12 and 13 ad revenue to grow by 4% and 3.5% respectively, we have left our FY11-13 earnings forecasts unchanged for now.

Our indicative fair value is maintained at RM1.20, which is based on unchanged CY11 PER of 13 times. We reiterate our 'outperform' call on the stock. ' RHB Research, Feb 2


This article appeared in The Edge Financial Daily, February 7, 2011.