- We reiterate our HOLD rating on Media Prima (MPR) with a lower fair value of RM1.80/share (vs. RM2.05/share previously), based on our DCF valuation. This follows a 5%-6% cut in our FY15 and FY16 earnings estimates, as we factor in a prolonged challenging consumer sentiment outlook.

- MPR incurred a net loss of RM29.5mil in 4QFY14, which brings the full-year earnings to RM75.5mil (-65% YoY). However, this includes the mutual separation scheme (MSS) expenses totalling RM79.8mil that was incurred during the quarter.

- Stripping off the exceptional item, MPR’s core net profit of RM155mil is in line with our and consensus expectations. The group declared an interim dividend of 5 sen/share, amounting to 11 sen/share for the year, which is also within our expectation.

- The group’s FY14 core net profit fell by 28% YoY in tandem with a revenue decline of 13%. Overall net adex revenue for the group declined by 11% YoY. This was largely due to the market uncertainties caused by the weak consumer sentiment and made worse by the airline tragedies during the year.

- Revenue for its print division declined by 17%, driven by the adex revenue contraction, as well as lower circulation revenue of 20%. The outlook for its print segment is expected to remain challenging given the current market condition and a shift in media consumption preferences towards digital media. The 20-50 sen hike in the cover price for its papers since January 2015 may partially alleviate the situation, although this may cause a further decline in circulation.

- Going forward, the group foresees another challenging year as the consumer sentiment will likely remain muted given the lower anticipated GDP growth and the implementation of GST. MPR intends to defend its earnings by focusing on non-traditional advertisers to reduce its dependency on the current top advertisers, while managing its costs to maintain operating margins.

- It will also continue to invest in platform agnostic content, to be packaged together with its 70,000 hours worth of existing ones and marketed to external TV operators. Positively, MPR has started selling its content to overseas clients.

- The stock is currently trading at an FY15F PE of 12x, compared with MCIL’s 9x and Star Publications’ 12x.

Source: AmeSecurities