Results

• Excluding the one-off restructuring cost of its Print operations of RM97.9m, cumulative FY16 core earnings summed to RM38.7m (-72% YoY) coming in below HLIB and street?s full year estimates, making up 50.3% and 55.7%, respectively.

Deviations

• One-off restructuring cost of RM97.9m and drop in adex and circulation trend.

Dividends

• Dividend of 4.0 sen/share was declared, bringing FY16 DPS to 8.0 sen/share (10.0 sen/share in FY15).

Highlights

• QoQ: Despite 4Q typically being the strongest quarter, revenue increased marginally by 0.6%. While EBITDA improved slightly by 6.8%, the group made a bigger loss before tax of RM11.5m (RM7.6m LBT in 3Q16). With the exception of its TV and print segment, all other segments experienced an increase in PBT. The group?s radio, outdoor and content creation segment recorded double digit growth however print segment which recorded a bigger loss of RM39.0m (LBT of RM24.0m in 3Q16) remained the main culprit to the group?s loss before tax.
• YoY: 4Q16 revenue declined by 13% mainly due to a 35% decline in its print segment?s revenue attributed to a drop in overall adex and circulation trend. Media Prima?s TV segment?s EBITDA fell 47% in 4Q16 due to much lower revenue generated and as the segment faced higher cost stemming from the implementation and operations of its home shopping business.
• We remain cautious on the ability of the restructuring exercise?s potential savings to counter the overall bleak outlook on print adex and circulation. We also remain cautious on Media Prima as outlook for overall adex remains poor due to structural shift in the media landscape from traditional to non-traditional media. Consumer and business sentiments continue to remain weak.

Risks

• Weak Adex growth; High content and newsprint cost; Threat of new players; Structural shift; and regulatory risk.

Forecasts

• We cut FY17-18 earnings forecasts by 19%-7% as we anticipate weaker adex environment, structural shift in media platform and soft business and consumer sentiment.

Rating

SELL (↔)

• Although we like MPR for its integrated media business and its monopoly position in Free-To-Air segment, we remain cautious as we expect prolonged soft consumer and business sentiment, weak adex environment and continued structural shift in media platform to challenge its profitability.

Valuation

• Maintain SELL, with a slightly higher TP of RM0.88 (from RM0.87) post earnings forecast adjustment and roll over of valuation into FY18. Our valuation is based on P/E multiple of 10x FY18 EPS. (4-year average P/E multiple).

Source: Hong Leong Investment Bank Research - 24 Feb 2017