Investment Highlights

• We maintain our HOLD recommendation on Media Prima (MPR) with a lower fair value of RM0.44/share (previously RM0.47/share) pegged to a PB of 0.7x. We have cut earnings by 55% for FY18F to account for lower EBITDA margin assumption for the TV segment amid hazy operating outlook due to the analogue switch-off set for 1QFY19, and as TV adex outlook remains unexciting for the remainder of the year.

• MPR’s 3QFY18 results came in below our expectations, despite recording a narrower core net loss of RM33mil. This brings 9MFY18 to a core net loss of RM56mil versus our full-year forecast of -RM48mil and consensus estimates of -RM55mil. This is after stripping out one-off net gains amounting RM35mil mainly from proceeds from sales of its share in Malaysian Newsprint Industries (MNI) in 2QFY18.

• 9MFY18 net profit improved 26% despite a marginal increase in revenue by 0.6%, mainly due to a lower base in 9MFY17 due to one-off impairment of MPR’s investment in an associate and early retirement scheme (ERS) payment in August 2017 vs. one-off net gains aforementioned in 9MFY18.

• TV, radio and publishing segments continue to drag topline: MPR’s TV and radio segment revenues declined 9% and 14% YoY respectively due to lower adex take-up while publishing revenue fell 17% amid lower circulation and advertising revenue.
• Content segment’s PAT improved despite lower revenue: PAT rose from RM3mil to RM 12mil despite revenue falling 31% as lower sales of TV programme production and sales of programme broadcast rights were mitigated by lower content production cost.
• Digital, home shopping and out-of-home are main revenue drivers for 9MFY18: Digital media revenue increased more than sixfold from RM5mil to RM33mil mainly from Rev Asia’s digital advertising revenue while MPR’s home shopping segment revenue jumped 63% amid greater exposure from 24-hour transmission on MyTV and UnifiTV and higher number of live shows resulting in higher sales for 9MFY18. Meanwhile, the group’s out-of-home segment turnover rose 2% due to higher yield from digital sites.

• Declines in traditional revenue streams offset by increase in digital and home shopping: Referring to Exhibit 2, revenue for traditional revenue streams declined by 12% despite traditional commerce tripling from RM8mil to RM24mil. Meanwhile, digital commerce revenue dropped 19% while digital ad revenue soared 160%. Overall, decline in traditional revenue streams were offset by increased revenue in digital and home shopping for the group.

• We reiterate our HOLD recommendation on MPR despite continued positive performance from its digital and home shopping segments, in anticipation of an uncertain operating environment for its TV segment upon analogue switch-off and as newspaper circulation continues to decline.

Source: AmInvest Research - 22 Nov 2018