Investment Highlights

• We maintain BUY on Media Prima (MPR) with a lower fair value of RM0.61/share (vs. RM0.71/share originally), based on FY23F PE of 9.5x vs. 11x previously. This is in line with PE valuations of regional peers, which saw an average share price decline of 8% YTD. Our FV also reflects a 3% premium to MPR’s 4-star rating.

• MPR’s 1HFY22 core net profit (CNP) of RM15.3mil (excluding exceptional items comprising net impairment reversal on financial instruments together with gains from termination of leases and legal claims) was within our expectations and consensus estimates.

• MPR’s CNP fell 23% YoY to RM15.3mil in 1HFY22 against RM19.9mil in 1HFY21 due to declines in home shopping, newspaper circulation & printing revenue. On a positive note, advertising revenue (+9% YoY) and content sales (+39% YoY) grew in 1HFY22.

• MPR’s broadcasting profit after tax (PAT) surged 77% YoY to RM47.7mil in 1HFY22 from RM26.9mil in 1HFY21 on the back of stronger TV advertising revenue from festive campaigns and content licensing.

• Higher advertising income boosted digital PAT by 54% YoY to RM4.5mil in 1HFY22 from RM2.9mil in 1HFY21. However, the group’s home shopping segment (16% of 1HFY22 revenue) reversed to a loss after tax (LAT) of RM9.1mil in 1HFY22 against a PAT of RM4.5mil in 1HFY21 as consumers returned to physical stores. LAT in the Out-of-Home (OOH) segment widened to RM7.8mil in1HFY22 from RM4.2mil in 1HFY21.

• QoQ, MPR’s CNP escalated 2.5x to RM10.9mil in 2QFY22 from RM4.4mil in 1QFY22, supported by improved advertising revenue from festive campaigns. LAT also narrowed in the OOH and home shopping segments.

• In the short term, we expect the outlook for adex spending growth to be unexciting due to weak consumer sentiments. However, looking beyond the short-term impact, we continue to like MPR as it is a proxy to the recovery in the media sector. Also, Omnia’s integrated marketing solutions give a competitive edge to MPR in competing for marketing and promotional campaigns.

• MPR is currently trading at an attractive 7.7x FY23F PE, against regional peers’ 9.5x and offers a compelling dividend yield of 4%.

Source: AmInvest Research - 25 Aug 2022