According to the The Edge, Media Prima is looking to trim 543 headcount, representing rationalization of 14% of total workforce. We estimate from the similar exercise in 2017, Media Prima will book ~RM44m compensation package for a total 543 employees and reap a cost savings of RM53m annually. Overall, we are positive on the move to ensure the survival of the Media Prima in the long run given the structural shift in the media sector towards digital presence. Maintain HOLD with unchanged TP of RM0.29 based on P/B of 0.43x (-2D below 3-year mean) of FY20 BV of RM0.67 per share.

NEWSBREAK

The Edge reported that Media Prima gave official notifications to all employees affected by its manpower rationalisation exercise, which is part of the next phase of its business transformation exercise. The entities affected under Media Prima are Sistem Televisyen Malaysia Bhd Employees Union (KSKSTMB), TV3 Executive Union (KESTMB), National Union of Journalists Peninsular Malaysia or NSTP Branch (NUJ NSTP) and National Union of Newspaper Workers (NUNW).

HLIB’s VIEW

Unavoidable exercise. According to the article, Media Prima is looking to trim 543 headcount, representing of 14% of its total workforce, without mentioning the total compensation package involved. We estimate (using the similar exercise in 2017 RM20m for 243 employees) Media Prima will need to fork out RM44m as a compensation package for the 543 employees. Based on FY18 annual report, Media Prima incurred total employee cost of RM382m (ex-termination benefits) on back of 3.9k headcount; this translates to a staff cost of RM98k/employee per annum. Based on that figure, we estimate Media Prima could save around RM53m annually from the whole exercise to trim 543 employees.

Necessary for long term survival. Overall, we are positive on the move to ensure Media Prima’s survival in the long run given the structural shift in the media sector towards digital presence. Media Prima has been hurt by weak contributions from traditional platforms, namely TV and print segments. While home shopping has shown promising top line growth, this is unable to cushion the falling traditional segments.

Forecast. We leave our forecast unchanged pending more clarity from management on the exercise details. However, based on our calculation, we estimate Media Prima to remain in the red in FY20 as the staff cost savings will be offset by compensation cost of c.RM44m.

Maintain HOLD with unchanged TP: RM0.29. Media Prima is aligning their business towards digital, and we believe the rationalization exercise bode well to its long term strategy to reduce the exposure on the traditional platforms. Our TP of RM0.29 is derived from P/B of 0.43x (-2SD below 3-year mean) of FY20 BV of RM0.67 per share.

Source: Hong Leong Investment Bank Research - 17 Dec 2019