MCIL posted a 1QFY17 core net profit of RM21mil (+14% QoQ, -43% YOY), representing 20% of

We place our fair value and numbers under review pending further clarification by management.

MCIL posted a 1QFY17 core net profit of RM21mil (+14% QoQ, -43% YOY), representing 20% of our and 18% of consensus full-year estimates. This was largely in line with our expectation given that Q1 profit made up 21%-31% of full-year estimates in the years between FY12 and FY16. YoY, MCIL's revenue deteriorated by 17% to RM333.8mil, owing in part to unfavourable  exchange rate movements and the weaker adex environment. Adjusted for currency impact, the decline in revenue would have been less severe at 13%. PBT declined by a larger quantum of 41% YoY despite falling newsprint costs, as a result. Besides lower revenue, the PBT drop stemmed from a higher effective tax rate of 34.6% in 1QFY17 vs. 29.4% in 1QFY16.

However, the decline in PBT would have been lower at 34% if we adjust for the currency impact.

MCIL's publishing and printing segment and the tour segment registered contractions in turnover of 15.3% and 22.5% respectively. The Group's travel segment took a hit after a series of terrorist attacks in Europe, which had significantly hurt the turnover of the tourism industry in the region (MCIL's main tour destinations). In the Hong Kong, Taiwan and Mainland China segment, revenue dipped 13% YoY amid muted growth for property and retail markets, particularly for the luxury high-end products. North America’s publishing arm recorded a 15% revenue decline despite the ongoing economic slowdown as well as the impact of a weakening CAD against the USD.

After a string of negative events, we expect to see modest recovery in the near term in tandem with the gradual improvement in MIER Consumer Sentiment Index. MCIL currently trades at 10.9x FY17F PER, more than 1sd above its 5-year average PER. Star and Media Prima are currently trading at a 1-year forward PER of 17.5x and 13.4x respectively.

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