Investment Highlights

• We maintain BUY on Media Prima (MPR) with unchanged fair value of RM0.75/share, pegged to FY22F PE ratio of 14x that is in line with its regional peers (Exhibit 4). This also reflects a 3% premium to its 4-star ESG rating as appraised by us (Exhibit 5).

• While maintaining FY22–23F earnings, we have raised our FY21F earnings forecast by 32% to RM41mil, reflecting positive contributions from MPR’s Omnia, publishing and content creation segments vs. loss assumptions previously.

• MPR’s transformation is spearheaded by Omnia’s integrated creative and marketing solution, which offers one-stop accessibility for broadcasting, publishing, digital, out-of-home and content. This has garnered strong enterprise interest as reflected in the group’s 2QFY21 QoQ revenue growth of 15%.

• The much stronger 2.8x QoQ core net profit surge in 2QFY21 was further boosted by better cost efficiency from the integrated operation, which supported Omnia’s quick turnaround. This was largely driven by 2 phases of group-wide manpower rationalisation in 2020 which reduced MPR’s workforce by 37% to 2.3K employees as at 31 December 2020. Hence, we expect Omnia’s growth to progress further in the coming quarters, underpinned by the recovery in adex.

• Adex in the newspapers segment has been stabilising in 1HFY21 after the sharp recovery in 4QFY20 from the low base in 2QFY20 (Exhibits 2 and 3). As the Covid-19 movement restrictions are being relaxed, we expect the adex recovery to remain intact, which should enable the publishing segment to stay profitable.

• This is likely to be bolstered by MPR’s printing partnership with 8 external commercial publications that could boost newspaper printing and distribution revenue for its publishing segment while partly cushioning the global decline in newspaper sales.

• We expect the contribution from its pay-per-view movie streaming platform, tonton CINEMA (which rolled out in March this year) to be minimal as the listed movies are mostly outdated content with low selling price starting from RM1.90/show.

• Nevertheless, MPR’s local vernacular content, which has successfully attracted collaboration with international OTT players (such as Disney+Hotstar, iQiyi and Netflix), is offered exclusively on these platforms which underpinned the group’s higher 1HFY21 content sales.

Source: AmInvest Research - 21 Sept 2021