Investment Highlights

• We maintain HOLD for Media Prima (MPR) with a higher fai value (FV) of RM0.44/share (vs. RM0.38/share previously) with a revised book valuation methodology at FY25F P/BV of 0.65x (at parity to its 5-year median) and 3% premium for MPR’s 4 star ESG rating.

• MPR’s core net profit (after adjusting for exceptional items o RM13mil) fell 36% to RM11mil in 1HFY24 from RM17mil in 1HFY23. This was below expectations, accounting for only 23% of our full-year forecast and 35% of consensus.

• The disappointing earnings stemmed from an 11% decline in topline. The drop in revenue was due to lower content sales ( 65% YoY), home shopping revenue (-34% YoY) and advertising revenue (-4% YoY). We believe that the fall in content sales came about as global over-the-top (OTT platforms rationalised content investments.

• Hence, we cut our FY24-FY26 earnings by 41%-44% to account for the prolonged decline in content sales, weake adex and elevated advertising cost.

• However, comparing 2QFY24 against 1QFY24, MPR’s CNP surged 7x higher to RM9.6mil from RM1.4mil. There was higher media advertising in all of the channels and improved demand for out-of-home display advertising. Nielsen’s ade data showed a significant improvement in 4QCY23 (Sep-Dec 2023) compared to preceding quarter with segmental increase in TV (+13% QoQ), radio (+22% QoQ) and digital (+21% QoQ). We believe that the growth was driven by seasonal festivities and year-end utilisation of marketing budgets by advertisers.

• Home shopping recorded a loss after tax of RM3.4mil (-22% QoQ) in 2QFY24 while print media’s profit after tax fell by 48% to RM6.6mil. The home shopping segment continued to lose steam as consumers reverted to physical shopping pos Covid-19. Print media declined (-4% QoQ) as technologica advances shifted readers to digital print from paper.

• Looking ahead to 2HFY24, we believe that advertising expenditure (adex) would be tepid as businesses remain cautious in their spending. In addition, we expect the home shopping segment to continue making losses due to intense competition from leading online shopping platforms such a Shopee and Lazada.

• A rerating catalyst would be the introduction of the bill on return of advertising expenditure as suggested by the Malaysian Communications and Multimedia Commission (MCMC). Under the bill, internet giants like Google and Facebook would have to compensate local news outlets fo content sourced from them.

• The bill has been implemented in Australia, where Google and Facebook paid a compensation of AS$220mil to the country’s media groups in 2022. If enacted in Malaysia, it would level the playing field between international internet giants and local media groups.

• MPR’s FY25F P/BV of 0.7x is comparable with its 5-year average.

Source: AmInvest Research - 29 Feb 2024