Results

• FY15 sales of RM1,427.7m was translated into a PATAMI of RM138.7m (12.51 sen/share), accounting for 96% and 94% of HLIB and streets’ full year forecasts , respectively. Earnings came within our expectation, but slightly below consensus.

Deviations

• None.

Dividends

• Proposed a final single tier dividend of 5 sen per share, subject to approval of shareholders at MPR’s upcoming AGM. This brings total DPS for FY15 to 10 sen per share vs. 11 sen per share in FY14.

Highlights

• FY15 review. Group revenue declined 5% yoy dragged down by all segments except its outdoor segment which showed 3% increase as more digital billboards were placed at key areas throughout the year.

• Media Prima’s operating expenses declined 12% yoy from RM1411.8m to RM1236.4m due to cost savings from MSS which took place last year. This also resulted in higher PATAMI yoy.

• With regards to its Home Shopping partnership with CJ O Shopping, management stated that it should breakeven in two years’ time. Media Prima will provide the airtime/ channel to CJ O, while leveraging on CJ O expertise in providing warehouse and logistics.

• Its home shopping business should be made available during the non-prime time. This will help offset the lower profitability of its non-prime time slot.

• To keep abreast with change in consumer preferences and technology, the group will be developing an app based on its hit TV programme ‘Jalan-Jalan Cari Makan’. We believe this will capture the younger set of audience that is more techsavvy as being a “foodie” is an in-thing among youngsters nowadays.

• Apart from the above, the group will begin selling its Tonton original series and Interactive TV show to its subscribers on Tonton platform.

Risks

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

Forecasts

• Tweaked our model post final results release. FY16-FY17 earnings trimmed lower by 2% - 3%.

Rating

HOLD

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

Valuation

• Maintain HOLD, with lower TP of RM1.27 based on the 10x FY16 EPS (4-year average P/E multiple). The stock lacks rerating catalysts and will be affected by slowdown in adex growth. The only saving grace is its decent dividend yield of 6.7% - 7.4%.

Source: Hong Leong Investment Bank Research - 29 Feb 2016