Results 

Below  expectations  –  Media  Prima’s  9MFY14  core PATAMI  of  RM105.0m  (9.5  sen/share)  came  in  below  our expectations, making up 56% of ours and  57% of streets’ full year  estimates.

Deviations

Weaker-than-expected  earnings  from  all  key  segments  save the digital media segment.

Dividends

Declared  a  dividend  of  3.00  sen/share,  matching  last  year’s dividend  during  3QFY13.  Ex-date  on  10-Dec-14, payment on 30-Dec-14.

Highlights 

3QFY14  review…  Revenue  plunged  by  14%  YoY  (QoQ:  -3%)  to  RM379.6m.  The  drop  in  revenue were largely caused by  all  segments  save  the  digital  media  segment  which improved  9%  YoY  (QoQ:  +12%).  3Q  PATAMI  fell  further  by 34%  YoY  to  RM42.2m  (3.8  sen/share).  QoQ  PATAMI increased 18% as MPR kept  its   costs well controlled despite the decline in revenue.   

9MFY14  review …  Revenue  dropped  12%  resulting  from  the challenging  adex  environment  and  was  exaggerated  on  by the  MH370  and  MH17  incidents.  Even  with  its  prudent  cost management  (expenses  was  lower  YoY  by  9%),  PATAMI plummeted  by  a  whopping  30%  to  RM153.4m  vs. RM218.3m  in 9MFY13.

Cautious  outlook…  We  believe  that  weak  consumer sentiment will still  persist  as we go into 2015 mostly resulting from  the  GST  implementation  in  April  next  year.  However, we  feel  advertisers  would  coax  consumers  into  spending more before  the implementation  of GST.

We  expect  Media  Prima  will  continue  to  leverage  on  the content  resources  that  they  have  to  further  retain  their viewers  and  capture  more  eyeballs.  We  are  optimistic  that the  next  quarter  should  be  better  as  4Q  is  the  strongest quarter,  historically  contributes  30% -35%  of  full  year earnings.  Only saving grace is  its high dividend yields 4.7%  -7.0%.

Risks

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

Forecasts

• We  cut  FY14,  FY15 and FY16 earnings estimates by 18%  -15%  to  reflect  lower  adex  growth,  market   uncertainties,  and poor  businesses  and  consumer  sentiments  resulting  from government  subsidy rationalisation.  

Rating

HOLD

• Although  we  like  MPR  for  its  integrat ed  media  business model  and  its  monopoly  position  in  FTA  segment,  we anticipate  adex  growth  would  be  sluggish  due  to  slower economic growth.  Maintain  HOLD.

Valuation

• Target  Price  slashed by 17% to RM1.78 from   RM2.10 based on  an  unchanged  targeted  P/E  multiple  of  10.5x  FY15  EPS (based on a 5-year  average).

Source: Hong Leong Investment Bank Research - 7 Nov 2014