• Media Prima (MPR) has released a press statement confirming that it will proceed with its manpower rationalization exercise, as part of its efforts to embark on a business transformation exercise i.e. change in business model and internal restructuring as announced on 1 November 2019. The restructuring exercise is expected to be completed by 1Q2020.

• Meanwhile, The Edge Markets website said that some 543 of MPR’s employees would be affected, citing New Straits Times Press’ (NSTP) National Union of Journalists (NUJ) where personnel affected would be from the group’s print publications i.e. NSTP, Berita Harian and Harian Metro.
   
• MPR’s total workforce stood at 3,897 employees as at YE 31 Dec 2018, according to its annual report. Assuming that 600 workers would be laid off, MPR’s overall workforce would be reduced by 15%, a move which we believe is in line with the group’s cost-saving efforts amid a challenging and changing media landscape.
   
• Based on the historical average range of termination benefits per staff, we estimate that termination benefits for this exercise could range between RM70mil and RM140mil. The group also hinted that the total cost for the exercise might exceed the amount provided for in FY17. As provisions and termination benefits are considered one-off items, we make no changes to our earnings forecasts.

• We maintain our HOLD recommendation on MPR with unchanged forecasts and fair value of RM0.39/share, pegged to a price-to-book (PB) ratio of 0.6x, in line with its 1-year historical average PB. We are cautious on MPR’s outlook amid a challenging operating environment where its traditional media segments are affected by declining adex and newspaper circulation, due to the structural shift towards digital content. This is despite positive progress in its digital and commerce segments relating to its Odyssey Transformation Strategy.

Source: AmInvest Research - 17 Dec 2019