MPR continues to maintain its profitability trajectory with 4Q20 core PATAMI of RM36.5m (+4.9x QoQ; +7.4x YoY), that brought FY20 sum to RM6.9m (FY19: - RM63m). This is better than our and consensus core net loss estimates of - RM25.9m and -RM26.7m, respectively. We expect the catalysts moving forward to be on the back of (i) contribution from WeTV partnership; (ii) 100% stake of CJ Wow home shopping segment and; (iii) strategic collaboration with Ministry of Education DidikTV that started airing on 17 Feb. After earnings adjustments and rolling over our valuation year, we upgrade MPR to BUY with higher TP of RM0.66 based on FY22f BVPS tagged to a higher P/B multiple of 1.0x (roughly +2SD above its 3-year mean).

Exceeds expectations. Media Prima’s 4Q20 core PATAMI of RM36.5m (+4.9x QoQ; +7.4x YoY), brought FY20’s sum to RM6.9m (FY19: -RM63m). This is better than our and consensus core net loss estimates of -RM25.9m and -RM26.7m, respectively. FY20 core numbers are adjusted for (i) impairment of financial assets (RM10.8m); (ii) termination benefits (RM13.7m); (iii) forex loss (RM261k) and; (iv) loss on disposal of PPE (RM468k).

Dividend. No dividend was declared (FY19: no dividend).

QoQ. Revenue inched up by 10.9% to RM298.1m as most segments fared better. Notably, OMNIA recorded the highest jump (+38%), followed by digital media (+29%), content creation (+22%) and publishing (+12%). Only OOH ended lower by -2%. Core PATAMI came in at RM36.5m (+4.9x), driven by better top line and lower effective tax rate of 14% (vs. 37% in 3Q20).

YoY. Overall sales softened by -2.1% dragged by the declined in publishing (-26%), broadcasting (-12%) and OOH (-37%) despite the improvement in digital media (+39%) and home shopping (+25%). Despite the sales reduction, core PATAMI staged encouraging growth (+7.4x) thanks to the group cost discipline that managed to show a positive turnaround.

YTD. Revenue declined by -5.8% to RM1bn on the back of the uncertain economic outlook brought by Covid-19 that impacted the group overall adex. Driven by the group successful transformation exercise, core PATAMI of RM6.9m was recorded (vs loss of -RM63m in FY19).

Outlook. We are confident on the group’s turnaround with efforts to expand its revenue channel while at the same time continuing with cost discipline. Positive efforts have shown to be fruitful and we expect the catalysts moving forward to be on the back of (i) contribution from WeTV partnership; (ii) 100% stake of CJ Wow home shopping segment and; (iii) strategic collaboration with Ministry of Education DidikTV that started airing on 17 Feb. With these fresh new catalysts we opine that the group is equipped to maintain its positive showing going forward.

ESG. Targeting the Environmental issue, one notable initiative by the group in 4Q20 was the Big Tree’s OOH educational campaign of Illustrasi Haiwan Malaysia (see Figure #3), a series of vibrant images of animals unique to Malaysia, displayed around the vicinity Petronas Twin Towers. This initiative comes with the hope of spurring interests in helping out with animal and habitat conservation.

Forecast. We revise FY21/22 forecasts upward to RM64.5m/RM83.7m respectively (from RM7.7m/RM27.1m) after positive take on these multi-pronged growth catalysts.

Upgrade to BUY from Hold with higher TP: RM0.66 based on FY22f BVPS tagged to a higher P/B multiple of 1x (roughly +2SD above its 3-year mean) after our earnings adjustments. The stock has risen by 90% YTD, but we believe the uptrend still has legs. Earnings growth prospects are improving, given the solid multi-pronged growth catalysts.

Source: Hong Leong Investment Bank Research - 26 Feb 2021