-  We maintain our BUY recommendation on Media Prima (MPR), with an unchanged fair value of RM3.17/share, based on a 10% discount to our DCF valuation.

-  MPR reported earnings of RM60mil for 2QFY13, bringing the total to RM87mil for 1HFY13. This accounts for 39% and 40% of our and consensus estimates. We deem the result to be in line with expectations, as the second half of the year is seasonally stronger. MPR declared a first interim dividend of 3 sen/share.

-  1HFY13 earnings saw a YoY growth of 12.5%, as the TV segment recovered from contractions experienced in 1HFY12 and its net revenue adex grew by 9%. Its print segment benefited from its strong readership in Malay market, which led to higher net advertising and circulation revenue of 4% and 2%, respectively.

-  2Q earnings rose tremendously QoQ by 122%, mainly driven by the TV segment which saw a rise of 44% in advertisement revenue due to non-traditional advertisements. Its core segments, TV and print, contributed 41% and 43% to its top line, respectively.

-  We understand that its traditional outdoor segment, which saw a growth of 12% in earnings in 1HFY13, are facing challenges due to ongoing construction works such as the building of MRT stations and widening of expressways. On the flipside, MPR has rolled out its digital outdoor advertising boards which enable it to secure more advertisers, as it can now cater to 3-5 advertisers per board, compared to a static board that only caters to 1. This also allows MPR to charge a premium, due to improved graphic quality, as well the boards’ strategic locations in high traffic areas.

-  Its online video portal, Tonton, achieved its target of 3mil subscribers. MPR has launched its premium content for the video portal, which is only exclusive to Tonton. However, its digital segment recorded a loss of RM2.5mil, as revenue growth could not keep up with higher operating costs i.e. content and bandwidth cost that came with increased viewership at the moment.

-  Going forward, MPR will continue to invest in quality and relevant content to grow earnings and reduce its dependence on TV, radio and print adex which contribute more than 80% of MPR’s total revenue.

-  We continue to like MPR for its:- (i) fully diversified media platform; (ii) dominant position in the Malay-language print segment; and (iii) virtual monopoly in the FTA TV segment with the lion share of more than 85%. The stock currently trades at a PE of 12x FY13 earnings.

Source: AmeSecurities