- We maintain our BUY recommendation on Media Prima (MPR) with an unchanged fair value of RM2.95/share, based on a 10% discount to our DCF valuation.

- MPR reported a flat 1QFY14 earnings of RM27mil (-0.3% YoY, -57.4% YoY), constituting only 12% of our and consensus estimates. As the first quarter is seasonally the weakest, we deem the results to be within expectations.

- Overall adex revenue contracted by 2% YoY in 1QFY14, as the same period last year recorded a strong performance due to increased adex spending by non-traditional advertisers ahead of the general election.

- Print segment’s revenue saw a decline of 15% YoY, due to lower adex and circulation. Outdoor media’s revenue similarly reduced by 7%, due to a slower take-up rate by advertisers after the Chinese New Year celebrations.

- However, its TV segment charted a decent performance, growing its revenue by 7% due to highly-rated programs. Coupled with lower direct costs as a result of the cancellation of its yearly carnival organised by TV3, the segment saw an increase of 73% in earnings.

- Its digital segment also saw a notable increase of 36% in revenue due to higher take-up rate of online advertisements, which subsequently narrowed the segment’s losses. The segment is expected to break even this year.

- In the near term, we believe the performance of the TV segment will be sustained, as the major sporting events this year (FIFA World Cup, Commonwealth Games and Asian Games) will prop up adex.

- On the other hand, print media is expected to remain lacklustre as advertisers will allocate more budget for the TV segment ahead of the major events. The continuous shift in consumer preference towards digital media also poses a threat to print media on the longer term.

- Going forward, MPR will continue to focus on growing its non-adex business, which is targeted to contribute 20%-30% (currently c.10%) to its bottom line in 3 years by monetising its over 70,000 hours worth of content, as well as growing its digital media business.

- As expected, no dividend was declared this quarter. We maintain our DPS assumption of 15 sen/share for this year, within its recently revised dividend policy of 60%-80%. This translates to an attractive yield of 6%.

- The stock currently trades at 12x PE for FY14F, well within its historical PE band of 9x-15x.

Source: AmeSecurities