We are initiating coverage on Media Prima Berhad (MPR), Malaysia‟s leading media group, with a Neutral recommendation at TP of RM2.39 (5% upside) on the basis of our sum-of-parts valuation with FY13 forward PE for the respective segments. Media Prima continues to focus on organic growth and with the lack of catalysts in the near-term, we regard our neutral recommendation to be reasonable. We do believe MPR is deserving of higher valuations, pertaining to the growth strategies which the group would undertake following its core strengthening initiatives.

Inching ahead with adex market share... a competitive landscape to contend with. The group‟s advertising expenditure (adex) share for Free-To-Air Television (FTA TV) and Print outperformed industry adex, while radio and outdoor growth were within expectations. We estimate c.5% growth in adex for FY12F short of last year‟s 6% growth amidst the volatile global economic conditions based on expenditure yet to be realised for i) Olympics, ii) government spending in light of the upcoming elections, and iii) Astro‟s potential initiatives to increase TV penetration via ad spend.

Organic growth. The group is strategizing to re-align their consumers within the new infrastructure for the year by focusing on strengthening their platform through internal initiatives such as value creation. Media Prima has allocated c.RM100m in CAPEX for its internal initiatives.

Revaluation of the media industry? With the emergence of Astro, we believe the media industry is in for a re-rating. Astro although based on a subscriber model via its pay-tv business, is gradually moving towards content creation and increasing its adex presence in the industry.

Stable and buoyant. The group is in a net cash position of RM478m and has revised its dividend policy to 25% - 75% payout ratio, paid out twice a year. We have given MPR a 50% dividend payout forecast for FY13, indicating a 4.8% yield. Due to a lack of catalysts in the near-term for the media sector as well as the group‟s current strategies, we render the potential growth with a neutral recommendation.

Source: PublicInvest Research - 01 Nov 2012