Results

1QFY13 core PATAMI grew by 30% to RM27.1m (2.50 sen/share), making up 13% and 12% of ours and streets’ estimates respectively.

Deviations

1Q earnings are seasonally weaker, and we believe that the anticipated strong Adex spent for the general election will make up for the current quarter’s earnings shortfall.

In the last 2 years, 1Q results made up 10-17% of full year earnings.

Dividends

None. Dividends usually declared in the subsequent quarters.

Highlights

YoY review.... Revenue grew by 9%, led by growth in the TV and Print division. The latter was driving by the growing Bahasa segment. EBITDA margin expanded by 2% to 19% from 17%, partially due to higher interest income. Overall, core earnings grew by 30%, coming from an exceptionally low earnings base in 1QFY12.

QoQ review... The uncertainty in the general election which has led to the pullback in Adex spending, coupled with seasonally strong 4QFY12, saw revenue declining by 23% whereby core earnings fell by a larger quantum of 63%, due to lower degree of operating leverage.

Stronger earnings ahead... Despite the weak earnings, we believe that 2Q earnings will recover strongly, lifted by the Adex spent for the general election, which will make up for the shortfall in 1Q earnings.

Turns net cash... Media Prima has also turned into a net cash company with RM41.3m (3.8 sen/share), increasing the possibility of higher dividend payout than our estimated 11 sen/share for FY13.

Risks

• Weak Adex growth;
• High content and newsprint cost;
• Threat of new players;
• Depreciation of RM vs US$; and
• Regulatory risk.

Forecasts

Unchanged.

Rating

HOLD

In view of the strong surge in share price which has exceeded our Target Price, we downgrade our BUY call on Media Prima to a HOLD. Nonetheless, the prospects for increased dividend payout poses an upside risk to our call.

Valuation

• Maintain Target Price of RM2.44 based on unchanged 12.9x FY13 earnings.

Source: Hong Leong Investment Bank Research - 8 May 2013