- We maintain our BUY recommendation on Media Prima (MPR) with a lower fair value of RM2.95/share (vs. RM3.18/share previously), based on a 10% discount to our DCF valuation, as we trim our adex assumptions.

- MPR’s FY13 core net profit of RM214.2mil (+ 2.3% YoY) came in largely within our and consensus estimates.

- The group declared a third interim dividend of 3 sen/share. A final dividend of 5 sen/share was also proposed. This brings the total FY13 DPS to 14 sen/share, translating to a 5.4% yield, and representing a 75% payout.

- Sequentially, the group’s 4QFY13 net profit remained somewhat flat, and was 13% lower compared to 4QFY12 despite the final quarter being seasonally stronger. We understand that this is due to weaker sentiment after the announcements on subsidy rationalisation and introduction of GST.

- Post adjustments for the result, our estimates suggest earnings will expand by ~5% in FY14F-FY16F. We introduce our FY16 earnings at RM251.8mil.

- While sentiments have been dampened recently, management remains optimistic for FY14 due to the various major events such as World Cup, Commonwealth Games and Visit Malaysia Year that will boost the adex.

- We believe that MPR would be a key beneficiary of this, as its businesses stretch across all segments of the industry. Moreover, FTA adex saw a decent recovery in January 2014 with a 10% YoY growth.

- Going forward, MPR remains focused on building and monetising content, as management believes it will contribute to income significantly in the near future. Margins for selling content is expected to be high, as the costs for these content have been mostly amortised. Content revenue saw a growth of 35% YoY to RM13.1mil in FY13.

- MPR has finally revised its dividend policy upwards to a narrower payout ratio of 60%-80% (previously 25%-75%). We have assumed a payout ratio of 73% for FY14F, translating to a yield of 6%. We believe that this is sustainable, given its estimated net cash position of RM130mil and a strong projected free cash flow of ~RM190mil.

- At the current level, the stock is trading at an undemanding FY14 PE of 12x.

Source: AmeSecurities