Media Prima’s 1QFY19 core losses widened to RM41.5m (against core loss of RM22.1m in 1Q18). The results came in weaker than our projected core loss of RM48.9m for the full year 2019. On YoY and QoQ basis, revenue was impacted from both TV and print segment on the back of weaker adex and lower newspaper circulation. We widen our core loss in FY19 further to RM65m (from RM48m) and RM19m (from RM2.4m). Maintain SELL with slightly lower TP of 34sen based on PB of 0.4 (2SD below 3 years historical mean) and FY19 BVPS.

Weaker than expected results. Media Prima’s 1Q19 revenue of RM274m (-14% YoY), translated into wider core loss of RM41.5m (against core loss of RM22.1m in 1Q18). The results came in weaker than our projected core loss of RM48.9m for the full year FY19. The setback for 1Q19 earnings was attributed to lower than expected contribution from almost all segments (except for home segment). However this was partially mitigated by lower operating expenses. No dividend was declared as expected.

QoQ. Despite revenue decline of -18%, net core loss widened to RM41.5m (-33%). Home shopping and digital revenue fell for the first time in four quarters by -11% and - 33%, while TV and print segment continue to deteriorate by -25% and -4% on the back of weaker adex and lower newspaper circulation.

YoY. Higher revenue from shopping segment (+24%) was insufficient to prevent 1Q19 revenue from sliding (-14%). Revenue was dragged by weaker contribution from TV (- 12%), radio and print (-40%) and digital (-20%) segments. On the home shopping segment, the higher sales were achieved through more hours dedicated for Home Shopping slots on NTV7 and Ch-9.

Outlook. We witnessed an improvement in the areas Media Prima is eyeing namely digital and home segment as its future key drivers. However we believe the growth will be unable to cushion the declining traditional media revenues.

Forecast. Post model update, we are now projecting Media Prima to incur wider core losses in FY19 and FY20 to RM65m (from RM48m) and RM19m (from RM2.4m). This factors in lower cost savings from various cost cutting measures and further lower contribution from print and TV segments.

Maintain SELL with slightly lower TP of RM0.34. We take this opportunity to adjust our valuation metrics after incorporating lower revenue assumption in light of protracted weaker traditional revenue. TP is derived from P/B of 0.4 (-2SD below 3 year mean) as it reflects the prolonged weakness to return to black. We believe all is not lost for Media Prima as festive seasons in 2Q will underpin better earnings performance and thus, the weak 1Q showing may not be repeated.

Source: Hong Leong Investment Bank Research - 31 May 2019