Media Prima’s (MPR) 3QFY22 net profit was down 6.1% YoY to RM7.2m as the increase in advertising expenditure (adex) was offset by wider losses incurred by the home-shopping segment. Cumulative 9MFY22 came in below expectations, only making up of 57% and 55% of our and consensus full-year estimates, respectively. However, we do note that the final quarter should be stronger sequentially due to seasonality, though we expect earnings to be weaker on a YoY basis. As such, we cut our FY22-24F earnings forecasts by an average of 7%, factoring in lower adex growth as well as lower contribution from e-commerce due to weaker consumer spending. Our TP is revised to RM0.51, based on 0.8x 3-year forward P/BV. We downgrade MPR from Trading Buy to Neutral.

• 3QFY22 revenue was down 7.8% YoY, mainly due to lower revenue from the home-shopping segment, which saw a 50% decline as a result of cautious consumer spending and competition from other e-commerce platforms. Advertising revenue has improved, leading to higher contribution from Omnia (+4% YoY), out-of-home (+49.4% YoY) and digital (+4% YoY) segments.

• 3QFY22 net profit decreased by 6.1% YoY, as higher contribution from broadcasting, out-of-home and digital segments was offset by losses incurred by the home-shopping segment. This segment suffered a loss after tax of RM6.2m compared to a profit of RM0.7m in 3QFY21.

• Future earnings growth may be impacted by weaker consumer spending. Judging from the prevalent use of social media platforms during the recent General Election campaigning, we believe MPR is not likely to deliver an exceptionally strong adex growth in the upcoming 4QFY22 results. We observe that traditional media channels have not been widely used during the campaign period. Moving into 2023, the economic environment should remain challenging and we expect businesses to scale down on advertising and marketing expenses. Meanwhile, its home-shopping losses could widen in view of weaker consumer spending on lower disposable income. As such, we cut our FY22-FY24F earnings forecasts by 4-10%.

Source: PublicInvest Research - 30 Nov 2022