Investment Highlights

• We maintain our HOLD recommendation on Media Prima (MPR) with a lower fair value of RM0.42/share pegged to a lower P/B of 0.6x (previously RM0.44/share). We have reduced FY19F–FY20F forecasts to account for expectations of subdued adex in CY2019 and uncertainty surrounding the analogue switch-off that will impact TV players.

• MPR’s FY18 core net loss came in below expectations at -RM101mil, versus our full-year projection of -RM74mil and consensus estimate of -RM81mil. This is after stripping out a one-off net gain amounting to RM160mil mainly from a gain on the disposal of PPE following the sale and leaseback exercise for its Bangsar and Shah Alam properties of RM133mil, and a gain on disposal of shares in its associate, Malaysian Newsprint Industries in 2QFY18.

• FY18 core loss narrowed from a core loss of RM142mil in FY17 as the previous year’s results were impacted by a oneoff net loss of RM508mil mainly from a series of one-off impairments in an associate, PPE and intangible assets, and a larger provision in respect of manpower rationalization in FY17 vs the one-off net gains aforementioned in FY18. Furthermore, taxation in FY17 was higher due to incurring deferred taxation of RM55mil.

• Declines in traditional revenue streams were offset mainly by higher revenues in digital and commerce: FY18 revenue declined by 1% YoY as revenue from digital and commerce rose 76% YoY, cushioning declines in traditional segments i.e. TV, radio and publishing segments in FY18 which were impacted by the softer adex environment.

• Home shopping, digital and out-of-home (OOH) were main revenue drivers for FY18: MPR’s home shopping revenue went up 65% amid greater exposure from 24-hour transmission on MyTV and UnifiTV and higher production of live shows in FY18 while digital ad revenue soared 145% mainly from Rev Asia’s contribution. Meanwhile, OOH revenue marginally improved due to higher yield from digital sites. These three segments contributed 36% of FY18 revenue, similar to the contribution of TV, MPR’s largest segment.

• Key highlights and plans ahead:

o CJ WOW Shop’s commendable progress: The home shopping segment is expected to break even in CY2019 with more broadcast hours and resources to be allocated to this segment in 2019.

o OOH digital edge through Big+: Big+, which was launched in Jan 2019 and seeks to marry traditional OOH and digital, will be central to the segment’s growth as it will provide higher yields compared with traditional assets.

o Expanding Rev Asia’s digital reach: Rev Asia acquired a 25% stake in Monster Scape, which owns Chinese news portal TanTanNews, to help advertisers reach out to a broader Chinese-speaking audience. For FY18, Rev Asia contributed approximately 88% of MPR’s digital segment revenue.

• We reiterate our HOLD recommendation on MPR despite progress in its digital and commerce segments, and its cost rationalization efforts across the group as we remain concerned of: (i) the hazy operating environment for its TV segment upon analogue switch-off, (ii) sustained decline in print circulation, and (iii) the challenging monetization of digital initiatives.

Source: AmInvest Research - 28 Feb 2019