Results

• Excluding the non-recurring Multiple Separation Scheme (MSS) expenses of RM79.8m which was completed on 15 Dec 2014, FY14 core PATAMI plunged 27% YoY (14.05 sen/share). This came in within ours and streets’ expectations, making up 103% and 99%, respectively.

Deviations

• None.

Dividends

• Dividend of 5.00 sen/share was declared, lower than previous year’s dividend in 4QFY13. It brings overall DPS to 11.00 sen, translating to dividend yield of 6.2%.

Highlights

• 4QFY14 review… Revenue increased 1% QoQ to RM384.7m from RM379.6m. All segments save the print segment achieved positive growth. Print segment fell 6% QoQ (YoY: -17%). Its core PATAMI of RM155.3m (excluding MSS expense) improved 19% QoQ, whereas Yoy experienced a double digit decline of 21%.

• FY14 review… Amid the challenging environment, poor consumer sentiment took its toll on revenue, falling 13% Yoy from RM1,722.9m to RM1,507.0m. Only digital media segment displayed higher revenue of 7% YoY. Audience share dropped by 1ppt to 40% (vs. 41% in FY13). On the contrary, due to efficient downhold of expenses, MPR managed to contain its operating expenses lower YoY by 10%.

• MSS expenses of RM79.8m were completed on 15 Dec 2014. 433 staff accepted the MSS, with the bulk of it coming from NSTP (print segment). We applaud the management for its continuous effort in streamlining its operation. Therefore moving forward, it should be positive for Media Prima as it will be able to save circa RM38m p.a.

• In the current weak environment and unfavourable market outlook, Media Prima shared that it will focus on its nontraditional revenue. We expect Media Prima will continue to leverage on the existing content resources to retain its market share.

Risks

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

Forecasts

• Cut earnings slightly for FY15 – FY16 by 2% - 3%. Subject to revision pending analyst briefing today. Also introduced FY17 forecast figures.

Rating

HOLD

Although we like MPR for its integrated media business model and its monopoly position in FTA segment, we anticipate adex growth would be sluggish due to unfavourable market outlook. Maintain HOLD.

Valuation

Reiterate HOLD with higher fair value of RM1.88 (+6% from RM1.77 previously) as we rolled forward our valuation, based on FY16 unchanged P/E multiple of 10.5x (based on a 5-year average).

Source: Hong Leong Investment Bank Research - 26 Feb 2015