Results

9MFY13 core PATAMI grew by 11% to RM150.7m (13.81 sen/share), making up 75% and 70% of ours and streets’ estimates respectively.

Deviations

We consider earnings to be above expectations as 4Q earnings made up 35% of full year profits in the last 2 years.

Dividends

Net dividend of 3 sen/share declared, matching last year’s corresponding payout, hence bringing full year divdiends to 6 sen/share (3 sen/share declared in 2Q). Ex-date on 11 Dec-13, payment on 30 Dec-13.

Highlights

Quarter review…. Posted 3Q revenue of RM439.3m, whereby QoQ contracted by 6% but flattish on a YoY basis. Bucking the trend was the Radio division, whereby revenue (RM19.7m) grew by 6%/35% QoQ/YoY, due to nontraditional advertisers. Despite flattish revenue, EBITDA (RM113.9m) managed to post growth of 2%/4% QoQ/YoY due to prudent cost control. Quarterly earnings of RM63.5m were further lifted by 6%/8% QoQ/YoY due to lower depreciation and financing charges.

9MFY13 review… 9M revenue grew by 4% to RM1.27bn, lifted by strong performance in all divisions. Likewise, EBITDA grew by 6% to RM293.1m. However, Print division’s EBITDA (RM84.8m) contracted by 9% despite revenue growth as it incurred higher expenses to capture the growing Malay readership. As overall expenses were well contained, core PATAMI grew by 11% to RM150.7m.

Strong 4Q expected… 3Q performance was muted as advertisers are still cautious despite the elections being over. However, 4Q is anticipated to be strong, driven by the year end annual festivities. We are expecting sequentially stronger earnings in 4Q, but YoY quarterly earnings growth will remain challenging.

Risks

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

Forecasts

We have tweaked our earning for FY13 by +4.6% and FY14 by -4.4%, and introduced FY15 earnings at RM243m (+18.5% YoY).

Rating

HOLD

Despite the absence of key sporting events, Media Prima’s efforts to explore innovative way to grow its revenue is a commendable effort in the current challenging Adex environment. We continue to favour its integrated complete media platform. However, in view of less than 10% potential total return from our new Target Price, we are maintaining our HOLD call.

Valuation

We have raised our Target Price to RM2.58 (from RM2.44) based on 12.9x FY14 P/E.

Source: Hong Leong Investment Bank Research - 19 Nov 2013