Results

The 1QFY14 core PATAMI was flat YoY (2.45 sen/share), making up 12% of both ours and the streets’ estimates.

Deviations

1Q earnings are seasonally weaker and it has historically made up 10-17% of full year earnings for the past 2 years and we believe that the upcoming mega events happening in CY14 i.e. Visit Malaysia Year and FIFA World Cup in Brazil will make up for the current quarter’s weak performance.

Dividends

None; usually declared in the subsequent quarters.

Highlights

YoY review. Revenue dropped by 4% from RM365.8m to RM351.0m largely due to weakness in the Print division. This was partly mitigated by higher revenue growth from the Radio and TV segments. 1QFY14 Core PATAMI was flat YoY.

QoQ review. PATAMI declined by 57% to RM27m (4QFY13: RM63.4m) due to seasonally weaker quarter coupled with weaker consumer sentiment which is holding back advertiser spending.

Weak outlook in print. Print revenue fell by 15% yoy. We believe that the outlook for newsprint segment will continue to be challenging due to the online migration of traditional print advertisements coupled with Adex dollar flow to TV medium during FIFA World Cup. Newsprint price has stabilized around ~US$610.

Cost mitigation. Given the cautious outlook on CY14 Adex, we believe that a better cost management will minimise the impact. On a positive note, FIFA World Cup will be a catalyst for advertising. Expect the adex to expand in tandem with GDP growth of 5%.

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

We continue to favour MPR’s integrated media business model and also the latest dividend policy of 60% to 80% which better optimises its capital structure. However, sentiment is still weak due to government subsidy rationalisation which will lead to a soft Adex environment. Hence, we are maintaining our HOLD call on MPR.

Valuation

Target Price maintained at RM2.58 based on unchanged 12.9x FY14 earnings.

Source: Hong Leong Investment Bank Research - 9 May 2014