Media Prima’s 1Q18 core losses of RM21.8m, (+71.1% QoQ, +43.3% YoY) came in within ours but below consensus expectations. The narrowed losses QoQ was due to improved revenue from print, content creation, and home shopping. The YoY improvement was contributed by Rev Asia (digital adex ) and the home shopping segment. With the sustained weak adex environment and structural shift to modern platforms, we opine that it will remain a challenge for the group to turn profitable. We maintain our forecast. Maintain HOLD with an unchanged TP of RM0.31.

Within expectation – Media Prima charted revenue of RM280.7m for 1Q18 (-8.3% QoQ, +3.1% YoY) translating into a core LATAMI of RM21.8m accounting for 24% of our full year forecast, in-line with ours but below consensus full year loss forecasts of RM90.3m and RM20.4m, respectively.

QoQ. Core LATAMI improved by 71.1% from a loss of RM38.5m in the preceding quarter. The improvement was due to higher revenue from print (39%), content creation (19.2%), and home shopping (20.4%) segment. Despite the 20% fall in print circulation, the segment was supported by higher adex and digital revenue.

YoY. Media Prima posted 1Q18 results with revenue coming in at RM280.7m (+3.1%) and core losses of RM21.8m (+43.3%). The declined in TV revenue (-13.6%) was cushioned by improve revenue from digital (98.2%) and Home shopping (+59%) segments. The improvement in the digital segment was contributed by advertising revenue of Rev Asia.

Outlook. Moving forward, we reckon that Media Prima’s digital initiatives should somewhat cushion the impact of declining revenue from the traditional platforms. However, Print and TV still dominates about 60% of group’s total revenue. Hence, with the weak adex environment and continued structural shift in the media platform, we opine that, it will remain a challenge for the group to turn profitable.

Forecast. Unchanged. Maintain HOLD, TP: RM0.31 based on P/B multiple of 0.5X, 2SD below its 5-year mean to reflect the slow moving traditional industry environment.

Source: Hong Leong Investment Bank Research - 25 May 2018