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Author: PublicInvest   |   Latest post: Fri, 6 Dec 2019, 9:18 AM

 

Media Prima Berhad - Higher Operating Cost Remained A Drag

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Media Prima’s 3QFY18 continued to be in the red with a core net loss of RM32.3m (vs. 3QFY17 core net loss RM48.8m), bringing cumulative 9MFY18 core net loss to RM55.8m (vs. 9MFY17 core net loss RM77.8m). The performance missed both our and consensus estimates. While the Group’s core net loss has narrowed, the progress is still slower-than-expected. The poor set of results was mainly due to the higher-than-expected operating expenses, which has been an on-going issue for the Group. As expected, the overall traditional adex remained soft (-12.0% YoY in 3Q18) due to lack of adex-friendly event and the structural shift towards digital platforms. Though the Group is expected to realize an estimated one-off net gain of RM127.7m upon the completion of the sales and leaseback exercise in 4QFY18 which would bring the full-year headline earnings back to the black, we remain cautious on the persistent operating loss. All in, we slashed our earnings forecast to assume a higher core net loss for FY18-19F, and expect the Group to only turnaround with a marginal net profit of RM5.9m in FY20F to reflect the challenges affecting the Group’s profitability. Our P/BV-based TP was consequently lowered to RM0.43 (from RM0.49). Maintain Neutral.

  • 3QFY18 revenue declined by 5.8% YoY, reversing previous two consecutive quarters’ positive revenue growth as the higher digital advertising and home shopping revenue were not sufficient to offset the drop in the traditional circulation and advertising revenue. All segmental revenues recorded negative growth YoY, except for digital media and home shopping. Digital media revenue improved 79.8% YoY to RM8.9m, mainly contributed by digital advertising revenue of Rev Asia which the Group acquired in August 2017. Home shopping continued to report encouraging revenue growth of 68.2% YoY, mainly attributable to the growth in number of products offering and better presence with launching of new channel on UnifiTV. Overall, digital and commerce revenue grew 78.7% YoY in 9MFY18. In term of transformation progress, the Group has reduced its reliance on traditional business to 72% in 3QFY18 (from 84% in 3QFY17).
  • 3QFY18 recorded core net loss of RM32.3m. The Group’s mainstays, TV and Print, were still the main culprits for the loss incurred in 3QFY18, recording LAT of RM30.9m and RM9.6m respectively (9MFY17 TV: -RM34.4m, Print: -RM49.7m). While the loss has narrowed, PAT for other segment such as Radio continued to drop (-58.4% YoY). On a brighter note, home shopping’s LAT has narrowed to only RM0.2m in 3QFY18 from RM3.3m, on track to achieve its target of breakeven in FY19F. Despite recording lower revenue, content creation grew to RM5.4m in 3QFY18 due to lower content production cost.

Source: PublicInvest Research - 22 Nov 2018

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