Results

• Below expectations – Media Prima charted revenue of RM1.03bil for FY17 (-2.9% YoY). This translates to a core LATAMI of RM153.2m, came in below ours and consensus full year loss forecasts of RM108.2m and RM86.4m respectively.

Deviations

• Higher-than-expected cost as the Group had venture into new digital business; higher outdoor media start up cost.

Dividends

• None.

Highlights

• QoQ: 4QFY17 revenue increased by 6.1%, which translated into core LATAMI of RM75.4m remained in the red from a core loss of of RM48.8m in 3Q17. This was mainly dragged by the print segment (lower advertising and circular revenue and home shopping.
• YoY: 4Q17’s losses widened to RM75.4m as compared to 4Q16 of RM1.7m. The sharp contraction in earnings was dragged by lower tv adex revenue, number of content creation, advertising revenue and newspaper sales as traditional media faced ongoing challenges of subdued adex and the shift to digital media.
• YTD: FY17 earnings turned into the red, recorded a loss of RM153.2m. The significant drop in earnings was on the back of lower yoy revenue contributions from traditional platforms such as TV networks (-22.0%) and print media (-22.4%).
• Outlook: Challenging time remains in the traditional media due to the digital disruption. Moving forward, Media Prima’s digital initiatives should somewhat cushion the impact of declining adex.

Risks

• Strong Adex growth; Lower content and newsprint costs; Appreciation of RM vs. US$ (content); and Regulatory risk.

Forecasts

• Unchanged.

Rating

SELL (↔)

• Despite MPR’s monopoly position in Free-To-Air segment with an integrated media business, we expect sluggish adex growth to persist into the medium term. Prolonged soft consumer and business sentiment, weak adex environment and continued structural shift in media platform will challenge its profitability.

Valuation

• We maintain SELL with an unchanged TP of RM0.45 based on P/BV multiple of 0.4X which is 2SD below 5 years historical average to reflect the deteriorating industry environment.

Source: Hong Leong Investment Bank Research - 23 Feb 2018