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PP 7767/09/2010(025354)

Malaysia Corporate Highlights l


RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

R e su l ts N o t e
27 May 2010
MARKET DATELINE

Media Chinese Int’l Share Price


Fair Value
:
:
RM0.775
RM1.14
FY10 Core Net Profit Surged 95.6% YoY Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (MEDIAC; Code: 5090) Bloomberg: MCIL MK


Net Core EPS Net
FYE Turnover profit EPS EPS# Growth# PER# C.EPS* P/NTA Gearing ROE NDY
Mar (RMm) (RMm) (sen) (sen) (%) (x) (sen) (x) (x) (%) (%)
2010 1,226.7 135.2 8.0 8.0 52.8 9.7 - 1.5 net cash 12.1 5.3
2011f 1,379.9 152.4 9.0 9.0 12.7 8.6 8.0 1.4 net cash 12.7 5.8
2012f 1,410.3 146.1 8.7 8.7 -4.1 8.9 8.0 1.3 net cash 11.4 5.8
2013f 1,442.7 153.1 9.1 9.1 4.8 8.5 0.0 1.2 net cash 11.1 6.1
Main Market Listing / Non- Trustee Stock / Syariah-Approved Stock By The SC # Excludes EI * Consensus Based On IBES Estimates

♦ Above expectations. MCIL’s 4QFY03/10 net profit of RM35.4m (-34.0% RHBRI Vs. Consensus
qoq) beat our and consensus expectations, with full-year net profit of Above
In Line
RM134.5m (+95.6% yoy) accounting for 108.6% of our and 109.3% of
Below
consensus full-year estimates. Key variances were: 1) stronger-than-
expected margins, where MCIL achieved a full-year EBIT margin of 14.6% Issued Capital (m shares) 1,683.9
vs. our projection of 12.6%. We believe this could be due to ongoing cost- Market Cap (RMm) 1,305.0
control measures as well as lower-than-expected newsprint prices; and 2) Daily Trading Vol (m shs) 0.7
a lower-than-expected 4Q effective tax rate of 17.7%, resulting in FY10 52wk Price Range (RM) 0.51-0.92
effective tax rate of 25% (vs. our assumption of 28%). We believe this Major Shareholders: (%)
Tan Sri Datuk THK 50.1
reflects the turnaround by its operating subsidiaries.
Zaman Pemimpin 9.2
♦ 4Q revenue fell 11.6% qoq while net profit dropped 34.0% qoq.
QoQ, revenue fell 11.6% due to weaker contribution from the print and
publishing segment (-7.5% qoq, in US$ terms) as well as lower revenue FYE Mar FY11 FY12 FY13
for the travel business (-3.7% qoq, in US$ terms). Nevertheless, the drop EPS chg (%) 3.3 3.2 n.a.
Var to Cons (%) 13.0 8.3 n.a.
was not unexpected as 4Q is typically a slower quarter. 4Q10 EBIT plunged
40.5% qoq on the back of the weaker revenue and 7%-pts drop in margin, PE Band Chart
which we believe reflects the operating leverage effects. 4Q10 net profit,
however, fell by a slower pace of 34% qoq, thanks to a lower effective tax PER = 10x
PER = 8x
rate of 17.7% (vs. 23.5% in 3Q10). PER = 6x
♦ Dividend. MCIL declared a 2nd interim TE DPS of US$0.00771 (about
RM0.025/share, vs. 4QFY09: US$0.0014). YTD, total TE DPS was
US$0.0122 or RM0.041 (FY09: US$0.0059), which was above our
expectations of RM0.027. This translates to a payout ratio and net yield of
51.1% and 5.1% respectively.
♦ Risks. The risks include: 1) weaker-than-expected adex; 2) higher-than- Relative Performance To FBMKLCI
expected newsprint costs; and 3) a depreciating RM vs. the US$.
♦ Forecasts. We have lowered our FY11 and FY12 effective tax rate MCIL

assumptions slightly to around 25% p.a. (from around 27.5% p.a.). As a


result our FY11 and FY12 earnings forecasts have been raised slightly by FBM KLCI

3.3% and 3.2% respectively. At the same time, we have raised our FY11
and FY12 TE DPS forecasts to RM0.045 p.a. respectively. This represents a
payout ratio of 49.8% and 51.9% respectively. We introduced our FY13
numbers.
♦ Investment case. Following the earnings revisions above, our fair value
has been revised up to RM1.14 (from RM1.09), which is based on
unchanged target CY10 PER of 13x. We reiterate our Outperform call on
the stock. David Chong, CFA
(603) 9280 2186
Please read important disclosures at the end of this report. david.chong@rhb.com.my

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Table 2 : Earnings Review


QoQ YoY YoY
FYE Mar (RMm) 4Q09 3Q10 4Q10 (%) (%) FY09 FY10 (%) Comments
Revenue 257.5 345.2 305.3 (11.6) 18.5 1,286.4 1,226.7 (4.6) 4Q higher yoy reflecting the improvement
in macroeconomic conditions but down qoq
due to seasonality. Geographically, SEA
region contributed 64.5% to 4QFY10
revenue while Hong Kong accounted for
another 28.4%.
Full-year weaker across the board, both
geographically and in terms of business
divisions, due to the economic downturn.

Operating profit (9.0) 73.4 43.6 (40.5) >100 119.3 182.5 53.0 Stronger full-year mainly due to the
publishing and printing business resulting
from, we believe: 1) recovery in ad
revenue; 2) effective cost-control
measures; and 3) lower newsprint cost.
Interest expense (0.8) (0.6) (0.7) 8.3 (15.1) (4.2) (2.5) (0.8) Total debt as at end-Mar ’10 was
US$32.4m (end-Dec ‘09: US$26.6m; end-
Mar ’09: US$20.0m)
Associates 0.0 (0.0) (0.3) >100 nm (0.3) 0.0 0.0
EI (13.8) 0.0 0.0 nm nm (13.8) 0.0 nm Relates to the provision for impairment of
goodwill in 4Q09
Pre-tax profit (23.6) 72.8 42.7 (41.3) >100 101.0 179.8 77.6
Tax (6.0) (17.1) (7.6) (55.9) 25.5 (44.6) (44.6) (0.1)
Minority interest 0.5 (2.0) 0.2 >100 (58.9) (1.8) (1.0) (45.8)
Net profit (29.2) 53.6 35.4 (34.0) >100 54.5 134.2 >100
Core net profit (15.3) 53.6 35.4 (34.0) >100 68.3 134.2 95.6

Margins (%)
EBIT (3.5) 21.3 14.3 9.3 14.9
Pretax (9.2) 21.1 14.0 7.8 14.7
Effective tax rate (25.5) 23.5 17.7 44.2 24.8 Effective tax rate was lower than the
applicable Malaysian statutory tax rate
mainly due to lower tax rates of certain
foreign subsidiaries.
Net profit (11.3) 15.5 11.6 4.2 11.0
Core net profit (3.8) 21.1 14.0 8.9 14.7
Source: Company, RHBRI

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Table 3 : Segmental Breakdown – Business Segment


QoQ YoY YoY
FYE Mar (US$m) 4Q09 3Q10 4Q10 (%) (%) FY09 FY10 (%) Comments
Revenue
Publishing & printing 71.8 90.4 83.6 (7.5) 16.5 182.6 155.7 (14.7) Full-year lower mainly due to weaker ad
spending as a result of weaker
macroeconomic conditions.
Travel 7.2 10.4 10.0 (3.7) 39.2 37.6 26.0 (30.9) Full-year lower due to macroecnomic
conditions and H1N1 outbreak but qoq
dropped due to seasonal effect.
Total 78.9 100.7 93.6 (7.1) 18.5 220.1 181.7 (17.5)

Operating profit
Publishing & printing 2.9 21.6 13.5 (37.6) >100 23.0 20.8 (9.5)
Travel (0.6) (0.2) (0.1) (55.7) (84.4) 0.7 0.3 (61.0)
Elimination 2.3 0.0 0.0 nm >100 0.0 0.0 nm
Total 4.6 21.4 13.4 (37.4) >100 23.7 21.1 (11.1)

Operating profit margin (%)


Publishing & printing 4.1 23.9 16.1 12.6 13.3 Improvement in full-year margins due to
lower newsprint prices and effective cost-
control measures.
Travel (8.8) (2.1) (1.0) 2.0 1.1
Total 5.8 21.2 14.3 10.8 11.6
Source: Company, RHBRI

Table 4 : Segmental Breakdown – Printing & Publishing Division By Geographic Region


QoQ YoY YoY
FYE Mar (US$m) 4Q09 3Q10 4Q10 (%) (%) FY09 FY10 (%) Comments
Revenue
Malaysia & SEA 50.9 62.9 60.4 (4.1) 18.6 126.4 111.1 (12.1)
Hong Kong & China 17.8 31.0 26.6 (14.3) 49.7 77.1 59.0 (23.5)
North America 8.2 6.8 6.6 (2.7) (19.4) 16.6 11.6 (30.0)
Total 81.0 100.7 93.6 (7.1) 15.5 220.1 181.7 (17.5)

Operating profit
Malaysia & SEA 5.0 17.5 14.0 (19.7) >100 23.9 21.1 (12.0)
Hong Kong & China (0.8) 3.2 (0.2) >100 (74.9) 1.7 0.7 (59.9)
North America (1.5) 0.7 (0.4) >100 (69.6) (1.9) (0.7) (64.6) Losses narrowed due to ongoing cost-
control measures after the restructuring
activities in 4QFY09.
Total 4.6 21.4 13.4 (37.4) >100 23.7 21.1 (11.1)

Operating profit margin (%)


Malaysia & SEA 9.8 27.8 23.2 18.9 19.0 9.8
Hong Kong & China (4.3) 10.4 (0.8) 2.2 1.1 (4.3)
North America (17.7) 10.0 (6.7) (11.4) (5.8) (17.7)
Total 5.7 21.2 14.3 10.8 11.6 5.7
Source: Company, RHBRI

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Table 5 : Earnings Forecasts Table 6 : Forecast Assumptions


FYE Mar (RMm) FY10a FY11F FY12F FY13F FYE Mar FY11F FY12F FY13F

Turnover 1,226.7 1,379.9 1,410.3 1,442.7 Sin Chew


Turnover gwth (%) 2.5 12.5 2.2 2.3 - ad revenue gwth (%) 3.0 3.0 3.0
- circulation revenue gwth (%) 0.0 0.0 0.0
EBIT 182.5 207.5 198.0 200.1
EBIT margin (%) 14.9 15.0 14.0 13.9 Nanyang
Net Interest (2.5) 3.1 3.8 3.8 - ad revenue gwth (%) 3.0 3.0 3.0
Associates (0.3) 0.0 0.0 0.0 - circulation revenue gwth (%) 0.0 0.0 0.0
Exceptionals 0.0 0.0 0.0 0.0
Ming Pao
Pretax Profit 179.8 210.6 201.8 204.0 - Ad revenue gwth (%) 5.0 3.0 3.0
Tax (44.6) (52.7) (50.3) (50.8)
Minorities 0.0 (5.5) (5.3) 0.0 Newsprint cost (US$/tonne) 550 575 575
Net Profit 135.2 152.4 146.1 153.1
Core Net Profit 135.2 152.4 146.1 153.1
Source: Company data, RHBRI estimates

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank
(previously known as RHB Sakura Merchant Bankers). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions and
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The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon
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The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on higher
risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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