Top Story : Media Chinese – Still An Outperform
Company Update
♦ MCIL has enjoyed a strong start to the year with its share price up 59.3% YTD. This has outperformed both the FBM KLCI (+5.4% YTD) and FBM100 (+6.2% YTD). We believe the strong share price performance has been due to factors such as improving economic conditions, which would generally benefit adex, and above-consensus quarterly results.
♦ We also note that ad spending for the Malaysian operations has got off 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% yoy.
♦ Recall MCIL’s 3QFY10 EBIT margin for the publishing and printing division expanded by 7.0%-pts qoq. This was due to stronger ad revenue during the quarter, which would flow straight to operating profit, and on-going cost-control measures. With two major cost items which are newsprint and staff cost are kept under control, we think MCIL is poised to benefit from the upswing in ad spend ahead.
♦ Given the improved liquidity on the stock, we are raising our target CY10 PER to 13x (11x previously), which is at a 20% discount to our target PER for Star (of 16x) on account of its smaller market capitalisation.
♦ Our indicative fair value has been raised to RM1.09 (from RM0.92) and our Outperform call on the stock remains unchanged.
RHB Equity 360°( MCIL, Pos, Petronas Gas; Technical: Affin) - 07/04/2010
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