Media Prima (MPR) posted a 21.1% YoY decline in 4QFY23F net profit due to lower advertising revenue and wider losses incurred by the home shopping segment. However, the impact was partially offset by higher profit contribution from out-of-home and digital media business. Following the change in its financial year end to June 30, FY23F will be encompass an 18-month period from January 2022. Extrapolating the 12-month period ending 31 December 2022, the results came in below expectations after stripping out non-operating items that include RM10.6m in Covid-19 related rent concession. We leave our earnings estimates unchanged as we expect its cost optimization effort would lead to lower operating expenses going forward. Our TP is unchanged at RM0.51, based on 0.8x 3-year forward P/BV. Maintain Neutral on MPR.

• 4QFY23 revenue was down 20% YoY, mainly due to lower revenue from Omnia, broadcasting, publishing and home shopping segments. Omnia, its largest revenue contributor (accounted for 80% of group’s revenue), posted a 13% decline due to softer advertising revenue. Broadcasting and publishing revenue slumped 24% and 19% respectively, also due to lower advertising revenue. Home shopping segment continued its downtrend, chalking a 45% drop in revenue as consumers favour in-store shopping following the removal of travel restrictions as well as greater competition from other e-commerce platforms.

• 4QFY23 net profit decreased by 21% YoY, as higher contribution from out-of-home and digital segments was offset by lower profit from Omnia and broadcasting segments, as well as losses incurred by home shopping. Home shopping losses widened to RM5m compared to RM2.2m in 4QFY21.

• Outlook. MPR has recently announced a collaboration with China-based television network Hunan Broadcasting System (Hunan) to co-produce programmes as well as broadcast Hunan-produced content on its Chinese TV network, 8TV. As one of China’s biggest media companies, this collaboration should enable technology exchange and other entrepreneurial ventures in the future. Nevertheless, we do not expect this to translate into any significant earnings uplift in the near term. In the long run, ability to transition and capitalize on digital platform would be the growth driver for media players in the industry. For now, MPR’s earnings growth is still dependent on traditional broadcasting (i.e. advertising slots on commercial television and radio broadcasting). It remains to be seen whether MPR could monetize on digital advertising services to compensate a declining adex on traditional platforms.

Source: PublicInvest Research - 23 Feb 2023