KUALA LUMPUR: RAM Rating Services Bhd has reaffirmed the AA1/Stable rating of Media Chinese International Ltd
’s (MCIL or the Group) RM500mil medium-term notes programme (2014/2029).
It said on Tuesday the reaffirmation of the rating is based on MCIL’s key financial metrics coming in within our expectations despite a challenging year, supported by its resilience in the local Chinese-language newspaper segment.
“Looking forward, FY March 2016 is anticipated to be another challenging year for the Group, given the soft consumer and business sentiment in Malaysia as well as a weak retail environment in Hong Kong.
“However, MCIL’s robust balance sheet is expected to enable the group to weather upcoming challenges and retain its leading market position in the local Chinese-newspaper segment,” it said.
RAM Ratings said the AA1 rating was supported by MCIL’s dominant position in Malaysia’s Chinese-newspaper segment, its robust financial profile and superior liquidity position.
The group maintained its leading position in the local Chinese-newspaper segment, retaining a solid audited circulation market share of 89% in the peninsula.
In terms of adex, the cumulative market share of the Group’s 4 main titles – Sin Chew Daily, China Press, Guang Ming Daily and Nanyang Siang Pau – stayed strong at 74%.
In addition, the group’s e-paper segment recorded encouraging growth, especially Sin Chew Daily and Guang Ming Daily. Meanwhile, MCIL’s Ming Pao Daily News retained its sixth-position in terms of adex share among Chinese paid newspapers in Hong Kong, registering a market share of close to 10%.
Despite a challenging year, MCIL’s balance sheet remained robust. The Group’s adjusted gearing ratio improved from 0.70 times in FY March 2014 to 0.62 and 0.52 times in FY March 2015 and 1H FY Mar 2016, respectively, owing to a lighter debt load.
Further, the group returned to a net-cash position in 1Q FY March 2016, where it is envisaged to remain, given the scheduled reduction in debt and low capex required for its operations.
Additionally, MCIL possesses a strong cash-generating ability, turning in respective adjusted funds from operations (FFO) debt coverage ratios of 0.42 times and 0.47 times for fiscal 2015 and 1H fiscal 2016.
“The group’s liquidity position is deemed superior. As at end-March 2015, it held US$118.62mil of cash and bank balances against US$9.89mil of short-term debt,” said the ratings agency.
RAM Ratings said MCIL’s rating was moderated by the increasing popularity of digital media, which poses stiff competition to traditional media platforms such as print, TV and radio.
It pointed out the impact of this industry shift is evident in the Group’s declining print circulation, as e-papers and independent online news portals gain traction. MCIL is also susceptible to economic cyclicality, with advertising revenue accounting for more than half of its top line.
Furthermore, the group is exposed to newsprint-price volatility and forex risk, given that a portion of its newsprint are purchased overseas in US dollars.
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