Results

Below expectations – Media Prima’s 1HFY14 core PATAMI of RM62.8m (5.7 sen/share) came below our expectations, making up 27% of ours and 28% of the streets’ estimates.

Deviations

Lower-than-expected earnings from the major contributor; Print and TV segments as well as the full impact from the MH370 tragedy. Expect the next quarter to be weak.

Dividends

Declared a dividend of 3.00 sen/share, matching last year’s corresponding payout. Ex-date on 10-Sept-14, payment on 30-Sept-14. As stated by the management, the dividend policy of 60-80% is still intact.

Highlights

1HFY14 review… Revenue dropped drastically by 11% from RM832.1m to RM742.7m. The decline was largely due to the drop in TV, Outdoor, and Print segment (8%, 11%, and 16% respectively). It was weighed on further by the full impact of MH370 incident. Note that the Print and TV segment is the major driver for the group’s revenue (42%-43% for both). MPR is losing its FTA TV market share to Malaysia’s Pay TV operator.

2QFY14 review… QoQ: Revenue grew by 12%, thanks to a stronger performance for all key divisions in 2Q as compared to 1Q (affected by seasonality). Core PATAMI shot up to 33% from RM27m.

YoY: Revenue and core PATAMI decreased 16% and 40% each. Lower revenue was due to the absence of one-off campaigns from NTAs. Radio and digital media continues to chart positive growth.

Outlook... Anticipating a weak 3Q due to MH17 and as the migration of print advertisement and users to the digital platform continues, we opine that the outlook for newsprint segment would be dreary. Management expects a challenging 2HFY14. The group will continue to focus on cost mitigation and reducing their dependency on the Non- Traditional Advertisers. We expect Adex to grow ~3.0% p.a, a drop of 1% from our previous forecast.

Risks

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

Forecasts

We cut FY14, FY15 and FY16 earnings estimates by 20%/14%/6% to reflect lower adex growth, market uncertainties, and the adverse impact of the MH370 & MH17.

Rating

HOLD

We favour MPR for its integrated media business model and also the latest dividend policy as stated above which better optimises its capital structure. However, sentiment is deeply affected by the government subsidy rationalisation and aviation tragedy which will lead to a weak Adex environment. Maintain HOLD.

Valuation

We roll forward our valuation base to FY15 due to lower forecasts and 5-year average P/E of 10.5x, and hence TP is reduced by 19% to RM2.10.

Source: Hong Leong Investment Bank Research - 15 Aug 2014