Investment Highlights

• We maintain HOLD on Media Prima (MPR) with unchanged fair value of RM0.22/share, pegged to a PB ratio of 0.4x.

• MPR registered a core loss of RM6mil in 2QFY20, bringing 1HFY20 core loss to RM34mil after stripping off net exceptional losses amounting RM15mil mainly from termination benefits charge and impairment charge on financial instruments. The results accounted for 46% of our projected full-year losses and 38% of consensus’ estimates.

• The group expects narrower losses in 2HFY20 due to: (i) expectations of gradual improvement in adex sentiments; (ii) MPR’s revised business model Omnia being accepted well by clients with more than 33 collaborations for Ramadhan Raya and the movement control order (MCO); and (iii) benefits from continued cost controls. As such, we reduce our FY20F– FY22F loss forecasts by 7–19%.

• YoY: 1HFY20 core loss narrowed after stripping off termination benefits of RM11.3mil in 2QFY20 due to a 19% reduction in overheads driven by its ongoing cost-optimization measures.

• Revenue dropped 11% due to decreased ad spend amid the Covid-19 pandemic, which was slightly offset by higher home shopping sales. Meanwhile, the group has redefined its operating segments for “Omnia” and “Broadcasting” (Exhibit 2).

• Segmental analysis:
  • Broadcasting: LBT narrowed to RM9mil (vs. RM15mil in 1HFY19) due to cost savings realized, despite revenue plunging by 74% due to the weak adex environment.
  • Out-of-home (OOH): Revenue and PBT declined due to deferment of display advertising contracts.
  • Publishing: Revenue dropped 49% mainly due to decline in newspaper advertising.
  • Digital: Revenue rose 32% while PBT improved due to the internal realignment of New Straits Time Press’ (NSTP) digital properties under this segment.
  • Content creation: Revenue slipped and an LBT of RM5mil was recorded due to lower TV production revenues.
     
  • Home shopping: Revenue climbed 34% and the segment registered a PBT of RM6mil (vs. LBT of RM8mil in 1HFY19) due to higher TV viewership and shift in consumers shopping habits during the MCO. With two million customers registered in May 2020, the group sees an increasing trend towards e-commerce mobile commerce (ECMC) sales, which contribute 52% of sales, the remainder of which are via TV. Despite the easing of the MCO, sales in July are still promising and on par to levels seen during the MCO.
• Maintain HOLD on MPR due to its lacklustre outlook amid a challenging operating environment and the Covid-19 pandemic coupled with a lack of adex catalysts. We are positive on its digital and home shopping segments and cost savings realized, but we are wary that traditional media earnings that make up the bulk of its revenue will continue to see declines.

Source: AmInvest Research - 28 Aug 2020