Results

• Within expectations: Media Prima’s revenue of RM329.4m (- 6% yoy; -14% qoq) translated into core PATAMI of RM18.9m accounted for 11% for both ours and consensus estimates.

Deviations

• 1Q has traditionally been the weakest quarter for the group as Adex spending is usually skewered towards the end of the year, with earnings accounting for 10%-17% for the past

4 years. As such, we deem the results to be in line.

Dividends

• None. Usually declared in the subsequent quarters. 

Highlights

• Yoy review. All segments save the outdoor division (+2% yoy) recorded a decline yoy. Overall turnover dropped 6% from RM351.0m to RM329.4m mainly due to weakness from the Radio and Digital Media segment, which logged on double digits decline of 18%.

• On a positive note, MPR managed to contain their expenses, charting a decline of 5% yoy.

• Qoq review. The weak consumer sentiment took its toll on MPR’s revenue; contracting 14% qoq from RM384.7m. However, Digital media segment finally saw its EBITDA turning positive.

• Print segment continues to disappoint, and we believe it is caused by the online migration as well as MPR losing some circulation due to price hike which was effective on 1st January 2015. Overall core PATAMI was lower by 62% due to the presence of MSS expenses incurred in 4Q14.

• With impact of GST, we opine that 2015 would be a challenging year as the sector is heavily affected by the poor consumer sentiment which we believe would not get any better soon.

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

• Although we like MPR for its integrated media business and its monopoly position in Free-To-Air Segment, we expect a sluggish adex growth considering the impact of GST on consumer spending.

Valuation

Reiterate HOLD, with unchanged TP of RM1.76 based on 4- year average P/E multiple of 11.6x FY16 EPS. Even though potential total return is 11%, we still maintain Hold as we feel the stock currently lacks any rerating catalysts, coupled with the impact of GST which will cause a slowdown in adex growth.

Source: Hong Leong Investment Bank Research - 15 May 2015