Results

1HFY13 core PATAMI grew by 12% to RM87.2m (8.00 sen/share), making up 45% and 43% of ours and streets’ estimates respectively.

Deviations

Expecting stronger earnings in the subsequent quarters, hence we consider earnings to be largely in line.

Dividends

Net dividend of 3 sen/share declared, matching last year’s corresponding payout. Ex-date on 11 Sep-13, payment on 30 Sep-13.

Highlights

Results review…. Revenue rebounded strongly in 2Q, growing by 27% QoQ (YoY: +4%) to RM466.2m, as its TV, radio and print division benefitted from election-related campaign advertisements. Due to better economies of scale achieved, earnings grew by 89% QoQ to RM51.2m (5.52 sen/share).

For the 1HFY13, revenue grew by 6% to RM832.1m, mainly due to stronger performance in the 2Q. Key divisions posted earnings growth with the exception of print segment which saw its PBT decline due to higher expenses. Overall, earnings grew by 12%.

Cautious outlook… During yesterday’s briefing, management remains cautiously optimistic on the Adex growth outlook mainly due to the jittery sentiments in the region. Management also shared that the month of July’s Adex growth was flat YoY due to higher Adex spending for Euro Football competition in the previous year’s corresponding period.

Higher dividends… Dividend policy will be reviewed and given Media Prima’s net cash position of RM50.5m (4.6 sen/share), we believe that higher dividend payout is possible in future.

Content monetising… Management will continue to focus on content development. The next step will be to monetise it and may materialise 2-3 years down the road.

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

Although we favour Media Prima for its integrated Adex medium, monopoly in the FTA segment, and venture into content creation, we believe that macro headwinds will continue to deter Adex growth, thus affecting the company’s earnings growth. We believe that fundamentals have been fully reflected in its share price. Hence, we are maintaining our HOLD call.

Valuation

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

Source:Hong Leong Investment Bank Research - 29 Aug 2013