Media Prima’s 3Q21 core PATAMI of RM2.8m brought 9M21’s sum to RM22.7m, which made up 65.4%/60.5% of our/consensus full year forecasts. We deem the results in line as we expect the group’s earnings to improve in the following quarter. We expect Media Prima to record a solid 4Q21 ahead as we expect the group to register stronger advertising revenue on the back of pickup in consumer activities, mega sales events, the holiday season in Dec and advertisers exhausting their marketing budget towards year end. Maintain BUY with an unchanged TP of RM0.61 pegged to unchanged P/B multiple of 1.0x based on FY22 BVPS.

In line. Media Prima’s 3Q21 core PATAMI of RM2.8m (QoQ: -80.9%; YoY: -70.6%) brought 9M21’s sum to RM22.7m (9M20: -RM36.3m), which make up 65.4%/60.5% of our/consensus full year forecasts, respectively. We deem the results in line as we expect the group’s earnings to improve in the following quarter. 9M21 core PATAMI is computed after adjusting for (i) net impairment reversal (+RM3.3m); (ii) foreign exchange loss (-RM133k); (iii) inventories written back (-RM26k); and (iv) gain on disposal of PPE (-RM408k).

Dividend. None (3Q20: none). 9M21: none (1H20: none).

QoQ. Revenue declined by -12% mainly due to advertising (-11.8%), home shopping (-13.3%) and newspaper sales (-11.9%). The decline in advertising and home shopping were due to the higher base in the previous quarter boosted by the Hari Raya festivities; while the decline in newspaper sales was due to the longer period of NRP movement restrictions (c.2 months vs 1 month in 2Q21). In line with the decline in revenue, core PATAMI recorded a similar decline in quantum to RM2.8m (vs RM14.6m).

YoY. Revenue declined -4.3% mainly due to home shopping (-16.6%), newspaper sales (-11.9%), newspaper printing (-14.6%), while partially offset by higher content sales (+1.2x). The decline in home shopping sales was likely due to the loss of NTV7 (rebranded to DidikTV in Feb 2021) as one of WOWShop main broadcasting channels. Newspaper sales and printing segments were negatively impacted by the NRP movement restrictions. In line with the decline in revenue, core PATAMI recorded a similar decline in quantum to RM2.8m (vs RM9.5m).

YTD. Revenue increased 8.2% mainly due to advertising (+13.3%), newspaper printing (+49.2%), content sales (+2.3x) while partially offset by home shopping ( -6%). Advertising revenue improved likely due to the effectiveness of its advertising solution OMNIA which cross sells across its different platforms; while newspaper printing sales improved as Media Prima sells more news printing capacity to external customers and content sales improved as Media Prima expanded its content sales to OTT platforms and foreign broadcasters. Home shopping on the other hand, declined due to the higher base SPLY when Malaysia went through its first lockdown under MCO 1.0 as well as the loss of NTV7 as one of its main recruiting channels. Core PATAMI improved to RM22.7m (from -RM36.3m) due to the increase in revenue coupled with lower operating expenses.

Outlook. We expect Media Prima to record a solid 4Q21 ahead as we expect the group to register stronger advertising revenue due to (i) pick-up in consumer and business activities from the easing of lockdown restrictions; (ii) mega sales event (11/11, 12/12) where e-commerce giants will advertise their sales events on TV prime time slots and curate special live show in partnership with Media Prima (Lazada 11.11 Super Show); (iii) the festive season in Dec; and (iv) advertisers exhausting their marketing budget towards year end.

Forecast. Unchanged.

Maintain BUY with an unchanged TP of RM0.61 pegged to unchanged P/B multiple of 1.0x based on FY22 BVPS. We continue to like Media Prima as we believe the future growth of the company is multi-pronged underpinned by the improved performance from its advertising revenue, the positive contribution from its home shopping segment and the growth in content sales and distribution. Its diverse revenue base allows the company to weather through business cycles that affect any particular segment.

Source: Hong Leong Investment Bank Research - 26 Nov 2021