Investment Highlights

• We maintain our HOLD recommendation on Media Prima (MPR) with an unchanged fair value of RM0.39/share, pegged to a P/B ratio of 0.6x. We tweak our FY20F–FY21F forecasts slightly for housekeeping reasons while maintaining our FY19F forecast.

• MPR registered a RM24mil core loss in 3QFY19, bringing 9MFY19 core loss to RM70mil, after stripping off one-off losses of RM3mil mainly from a net loss on impairment of financial instruments. The results accounted for 74% of our full-year projected loss of RM95mil.

• 9MFY19 core loss widened by 26% vs. 9MFY18, after excluding one-off gains of RM35mil in 9MFY18 mainly due to proceeds from sales of shares in its associate, Malaysian Newsprint Industries. This was in tandem with a 10% decline in revenue, where revenues fell across all segments except for home shopping and digital due to continued adex concerns following a quiet post-festive season.

• Traditional media segments i.e. TV, radio & publishing, continue to face a challenging environment, with revenues declining by 11%, 30% and 27% respectively amid the dull adex landscape. The publishing segment suffered from declining newspaper advertising (-21%) and dwindling circulation (-27%), whist radio was also impacted by the growth of digital marketing options for advertisers on top of adex worries. However, TV segment losses narrowed due to better cost management from tonton’s democratization in 3QFY18 and manpower rationalization exercises done in 1QFY19.

• Digital and out-of-home (OOH) not spared from declining PATMIs: Digital revenue was up 5%, particularly for its media ventures via its exclusive advertising reseller partnerships but PATMI declined due to lower shared service revenue. As for OOH, PATMI shrank 68% amid lower occupancy rates for static panels and cautious ad spend despite its digital panels showing a growth of 25% in 3QFY19.

• Meanwhile, home shopping segment LBT widened amid higher costs associated with increased production demands despite revenue rising 11% due to higher exposure from the addition of slots on ntv7 and Channel 9.

• We remain cautious on MPR as it faces a challenging operating environment where its traditional media segments are plagued by lower adex, and continued declines in newspaper ads and circulation amid the structural shift towards digital content. This is despite positive progress seen in its digital and commerce segments relating to its Odyssey Transformation Strategy. Overall, we maintain our HOLD recommendation.

Source: AmInvest Research - 22 Nov 2019