Media Prima’s 4Q19 core net profit of RM9.3 (3Q19: -RM25.67, 4Q18: -RM38.5m), brought FY19 core net loss to -RM70.3m (FY18: -RM119.8m). We deem the results as above expectations against our and consensus core net loss estimates of -RM95m and -RM97m, respectively. We calibrate our balance sheet number to adjust the decrease in the equity to reflect the higher accumulated losses (which also imputes FY19 EIs). Maintain HOLD rating with lower TP of RM0.215 based on P/B of 0.4x (-2D below 3-year mean) and FY20 BV of RM0.50.

Results above expectations. Media Prima’s 4Q19 core net profit of RM9.3m (3Q19: -RM25.6m, 4Q18: -RM38.5m), brings FY19 core net loss to -RM70.3m (FY18:- RM120m). This is better than ours and consensus core net loss estimates of -RM95m and -RM97m, respectively. Our FY19 core numbers are adjusted for (i) impairment of investment PPE (RM24.2m) (ii) impairment of intangible assets (RM16.6m) (iii) termination benefits (RM75m) (iv) forex loss (RM1.1m) and gain on disposal of non current assets held for sale

Dividend. No dividend was declared (FY18: no dividend).

QoQ. 4Q19 revenue inched up by 14.7% to RM304.6m mainly driven from higher contribution from all segments. Notably, traditional platforms; TV and radio revenues rebounded by 10% and 9%, respectively, while content division revenue surged 16% chiefly from the success of Ejen Ali The Movie. Core net profit came in at RM9.3m vs. core net loss of RM25.6m mainly driven from lower operating expenses and lower depreciation charge.

YoY. Core net profit of RM9.3m against core net loss of -RM38.5m in 4Q18 was thanks to lower operating cost by 4.8% but partially offset by higher depreciation charge. Revenue accelerated by 15% premised on higher contribution by all segments especially commerce and adex segments.

YTD. Revenue declined 6.7% to RM1.1bn no thanks to lower contribution from traditional platforms; advertising revenue which fell by 11% YoY while print division fell 12.3%. Core net loss narrowed to -RM70.3m vs. core net loss of -RM120m as a result of lower operating expenses.

Outlook. Contribution from traditional adex remains a drag for Media Prima given the change of customer preference to digital media. With no clear signal for traditional adex to recover, we believe Media Prima will accelerate the efforts to increase the contribution from digital segment from both online and offline platforms to cushion the falling revenue. In addition, we believe more cost management initiatives will be another priority for Media Prima to cushion the falling traditional adex.

Forecast. Despite the losses coming in lower than projected, we keep our forecasts (i.e. loss) for FY20-21. We calibrate our balance sheet number to adjust the decrease in the equity to reflect the higher accumulated losses (which also includes FY19 EIs).

Maintain HOLD but with lower TP: RM0.215. We continue to remain cautious on Media Prima’s short to medium term outlook due to the impact of digital disruption to its traditional platforms and weak consumer sentiment. Our TP of RM0.215 (from RM0.29) is derived from P/B of 0.43x (-2SD below 3-year mean) and revised FY20 BV of RM0.50.

Source: Hong Leong Investment Bank Research - 27 Feb 2020