Highlights

• Below are the key takeaways from Media Prima’s analyst briefing for FY14 results:

• With MSS expense all over, Media Prima’s cost saving initiatives should be able to provide cushion for its slower revenue growth. Management will continue its effort to keep operating expenses well contained.

• Thanks to higher digital revenue and improved bandwidth costs, Media Prima’s digital segment recorded lower losses YoY (a drop of circa 19% excluding the exceptional items). With the introduction of TonTon Premium, Media Prima hopes to retain and gain more audience share on its digital platform.

• On the print side, the flood in the east coast affected its printing revenue as the distribution of newspapers was hampered. Malay segment continues to be the revenue contributor. For FY14, it contributed 82% of revenue. We anticipate the outlook for print segment will remain challenging as consumers’ shifts from paper to online.

• Overall, Media Prima remained cautious on 2015 Adex outlook. On a positive note, dividend payout of 60%-80% should be intact. Management also shared that capex should be around RM100m.

• In the current weak environment and unfavourable market outlook, Media Prima will focus on its content development, particularly during the prime and super prime time that garners higher number of viewers.

• As for now, we feel Media Prima still lacks any rerating catalyst. The only saving grace is its fairly high dividend yield of 6.2% - 6.7%.

Risks

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

Forecasts

• Cut FY15, FY16 and FY17 earnings estimates by 12% - 15% to reflect slower adex growth and unfavourable market outlook.

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 TP lowered to RM1.76 (-6% from RM1.88 previously) based on updated 4-year average P/E multiple of 11.6x FY16 EPS and post earnings cuts.

Source: Hong Leong Investment Bank Research - 27 Feb 2015