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Wednesday, August 17, 2011

AMEDIA - An undervalued media counter (OSK)

Trading at an FY12 PER of 3.9x compared to our FY12 small-cap average of 6x, Asia Media truly deserves better valuation given:

i) its new entry in DOOH transit media, which has an attractive CAGR growth of 44.1% p.a. in advertising expenditure,
ii) opportunities of unlocking the potential value by expanding coverage into other public transports, namely, KL Monorail, LRT, KTM Komuter and wider RapidKL network routes, and
iii) strong double-digit earnings growth in the next 2 years, thanks to its enlarged customer base as well as high-margin services in air time and programme sponsorship.

Owing to its short business track record, we are valuing the stock based on 5x FY12 PER (20% discount to our FY12 small-cap average PER), giving us a fair value of RM0.34. Note that the company recently proposed a private placement to meet the 30% Bumiputera equity conditions stipulated by the Malaysian Communications and Multimedia Commission
(MCMC). It currently already has 18% Bumiputera shareholding and might need to issue 12% more new shares to meet the required shareholding level. Hence, the fair value of Asia Media would be RM0.30 on a fully-diluted basis.

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