Media Prima (MPR) announced that a consortium comprising Seni Jaya Sdn Bhd and its wholly-owned subsidiary, Big Tree Outdoor Sdn Bhd (BTO) had received a Letter of Acceptance from Mass Rapid Transit Corporation Sdn Bhd (MRT Corp) for Package B of the advertising concession on an exclusive basis. The concession includes advertising opportunities along the MRT line for a period of ten years from the first phase commercial operation of Lembah Kelang-Jajaran Sungai Buloh-Kajang line, expected at the end of CY16. We are positive on the concession award to the BTO-Seni Jaya consortium as it would generate additional recurring income to Media Prima’s outdoor business segment for the next 10 years. Nevertheless, we make no changes to our earnings forecast as we have accounted for revenue growth potential into our model. Our Neutral call on Media Prima with a TP of RM1.31 is maintained.

BTO-Seni Jaya consortium. BTO holds a 60% stake in the consortium, while the remaining 40% is held by Seni Jaya.

MRT advertising concession. MRT Corp has recently awarded three advertising packages (Package A – Station Advertising, B – Exterior Station and C – Train Advertising) for the MRT Sungai Buloh-Kajang Line (SBK Line) for a concession period of ten years each. MRT Corp had earlier called for proposals for the design, build, operate and transfer of advertising media for the SBK Line via a tender in April 2016 with the closing of submission in June 2016. First phase of the SBK Line between Sungai Buloh and Semantan stations is expected to begin by end of this year, while the whole system would commence by the middle of 2017. SBK Line has a track length of 51km with 31 stations and 58 trains. The BTO-Seni Jaya consortium was awarded the Package B concession (Exterior Station i.e. Piers to Viaduct and Ancillary Buildings), which covers advertising opportunities along the MRT train line of 41km (excluding tunnels). News media quoted CEO of BTO expecting the MRT concession to generate approximately RM300m for the 10-year period.

Our view. We are positive on the concession award to BTO-Seni Jaya consortium as it would generate additional recurring income to Media Prima’s outdoor business segment for the next 10 years. Nevertheless, we make no changes to our earnings forecast as we have taken into account the potential revenue growth into our model by assuming 8% growth for the outdoor media segment. Assuming RM18m potential revenue from the newly awarded concession (60% of RM30m per annum), the overall impact to the Group’s revenue would be minimal as it constitutes only 1.2% of our FY17 revenue estimate. The contribution to the bottom-line might be insignificant in the near term due to start-up costs in the early concession period. We maintain our Neutral call on Media Prima with an unchanged TP of RM1.31.

Source: PublicInvest Research - 30 Sep 2016