Media Chinese International (MEDIAC) has reported better-than-expected results for the first quarter of FY25, driven primarily by substantial savings on operational expenditures and lower depreciation costs. Despite a significant increase in pretax profit from the travel segment, which more than tripled year-on-year, these gains were insufficient to counterbalance the ongoing losses in the print and publishing divisions.

According to Kenanga Stock Broking House, the recommendation for MEDIAC remains UNDERPERFORM, with an unchanged target price of RM0.11. This call reflects an adjustment in the forecasts, reducing the anticipated core net losses for FY25F and FY26F to RM24.7 million and RM22.3 million, respectively, from previous estimates of RM38.5 million and RM35.9 million. The adjusted target price is based on a 0.3x FY25F price-to-net tangible assets (P/NTA) ratio, representing a discount of 40% compared to the sector's historical average.

The company's 1QFY25 core net loss was reported at RM3.4 million, a notable improvement from the RM11.2 million loss in the same quarter the previous year. This positive deviation from forecasts was attributed to reduced depreciation and overheads, particularly at MEDIAC's Malaysian operations. The travel segment saw a 30% year-on-year increase in revenue, largely due to heightened aviation capacity, the introduction of luxury tours, and visa-free travel policies in several countries. However, the print and publishing segment experienced a decline in revenue by 5% year-on-year, impacted by reduced circulation and advertising expenditure.

Despite these improvements, the publishing division's performance remains weak, and the advent of generative artificial intelligence (Gen AI) technology is expected to further challenge the print advertising sector. The decline in advertising expenditure for Chinese-language newspapers, coupled with increased competition from digital media platforms, has contributed to MEDIAC's diminishing market share in the industry.

MEDIAC's asset write-downs in 4QFY24, specifically concerning its smaller printing plants and major publication mastheads, have led to lower depreciation costs, which partly cushioned the financial impact. Nonetheless, the company faces continued pressure from fixed costs and competition within the digital media landscape, which could further erode its market position.

Source: Kenanga
Title: Anchored by its Travel Business