Investment Highlights

• We maintain HOLD on Media Prima (MPR) with a lower fair value (FV) of RM0.39/share (vs RM0.41/share previously) on rolled-forward target FY24F PE valuation to 8.5x, in line with peers. Our FV also reflects a 3% premium for MPR’s 4-star ESG rating.

• MPR’s 15MFY23 core net profit (CNP) of RM18mil (after adjusting for exceptional items, mainly gain on disposal of non-current asset held for sale of RM13mil and Covid-19-related rent concession of RM10mil), was below expectations, accounting for 24% of our earlier 18MFY23F forecast and 26% of consensus’.

• The deviation was due to weaker-than-expected contribution from the advertising business. We lower our earnings estimates for FY23F by 50% and FY24F by 2% to account for the soft adex recovery. To recap, our FY23F earnings span a period of 18 months from 1 Jan 2022 to 30 Jun 2023 following MPR’s change in financial year-end.

• MPR posted a core net loss (CNL) of RM15mil in 5QFY23 against a CNP of RM4mil in 1QFY23 mainly due to declines in revenue in home shopping (-40% YoY), content sales (-42% YoY) and advertising revenue (-7% YoY).

• On a quarterly basis, MPR’s CNP dipped into red in 5QFY23, mainly dragged by weaker advertising revenue (-20% QoQ). This was not a surprise as most of the festive events took place in 4QFY23. We expect earnings for the following quarter to be stronger, backed by the Hari Raya campaigns.

• Looking ahead, we forecast an adex (excl. digital) growth of 5% in 2023F. MPR has taken steps to position for a recovery in adex and consumer spending via the launch of Omnia, an integrated marketing solution, since Apr 2020.

• We view MPR as fairly valued at 9x FY24F PE, 9% above peers’ 8.5x.

Source: AmInvest Research - 25 May 2023