Investment Highlights

• We maintain BUY on Media Prima (MPR) with unchanged forecasts and fair value of RM0.86/share, pegged to 14x FY22F PE, in line with its regional peers. This also reflects a 3% premium to its 4-star ESG rating.

• MPR’s core net profit (CNP) of RM4mil (after excluding net impairment charges on financial instruments and gain on termination of leases) accounted for 7% of our forecast and 6% of consensus estimates. We consider the results to be in line as 1Q is typically seasonally weaker and expect stronger quarters ahead.

• MPR recorded lower (-16%) CNP of RM4mil in 1QFY22 against RM5mil in 1QFY21 due to lower home shopping, newspaper circulation and printing revenue. On a positive note, MPR enjoyed higher advertising revenue and content sales in 1QFY22.

• YoY, MPR’s broadcasting PAT grew 2.3x to RM24mil in 1QFY22 from RM11mil in 1QFY21 on the back of stronger TV advertising revenue and content licensing revenue as well as better margins.

• However, the group’s home shopping segment recorded a loss after tax of 4.6mil vs. a net profit after tax of RM6.5mil in 1QFY21. We attribute this to weaker consumer spending as consumers returned to physical stores following the easing of movement restrictions.

• QoQ, MPR’s CNP fell 90% to RM4mil in 1QFY22 from RM42mil in 4QFY21. 4QFY21 benefitted from higher advertising and home shopping revenue during Chinese New Year campaigns. We expect 2QFY22 earnings to be stronger, backed by Hari Raya campaigns.

• We continue to like MPR as a strong recovery play in the media sector. The integrated marketing solutions offered by Omnia position the group for a strong recovery from an industry-wide adex recovery. As Malaysia transitions to the endemic phase and borders reopen, we expect higher adex spends as advertisers increase their marketing budget.

• We view MPR as undervalued as it is trading at 9x FY22F PE, below its regional peers of 14x.

Source: AmInvest Research - 31 May 2022