Media Prima’s 1Q22 core PATAMI of RM4.4m (QoQ: -84%; YoY: -17%) came in below our/consensus estimates at 6.6%/6.2% due to the continued decline in the home shopping segment. Given the results shortfall, we lower our FY22/FY23 core PATAMI by -25.0%/-22.2% to RM50.7m/RM62.1m. Maintain BUY with a lower TP of RM0.67 from RM0.72 based on 12x FY23 P/E. We believe that subsequent quarters’ earnings would be supported by continued growth in its advertising and content sales segments. Moreover, the group has an attractive projected FY22 dividend yield of 6.5%.

Below expectations. Media Prima’s 1Q22 core PATAMI of RM4.4m (QoQ: -84.3%; YoY: -17.0%) was below expectations, accounting for only 6.6% and 6.2% of ours and consensus estimates, respectively. The results shortfall was due to the continued decline of its home shopping segment. Core PATAMI was arrived at after adjusting for forex loss (RM35k), impairment of financial instruments (RM1.6m) and gain on termination of leases (RM3.2m).

Dividend. None (1Q21: None).

QoQ. Revenue decreased by -21.7% due to (i) lower advertising revenue (-26.1%) as 1Q is usually the softest quarter for adex; and (ii) lower home shopping (-16.7%), but partially cushioned by higher content sales (+31.6%). Consequently, core PATAMI decreased -84.3% due to high base effect in 4Q21.

YoY. Revenue decreased by -2.8% mainly due to lower newspaper sales and newspaper printing (-25.7% and -31.5% respectively), and home shopping (-44.5%) but partially offset by higher advertising (+14.5%) and content sales (+1.1x). The decline in home shopping was due to consumers returning to physical shopping following the reopening of the economy. The increase in advertising was due to increased adex across most of the group’s media platforms through Omnia while content sales continues to see strong momentum from higher content sales to OTT platforms and foreign broadcasters. Subsequently, the group recorded a lower core PATAMI by -17.0% given operating leverage effect and higher taxation.

Outlook. Media Prima’s 1Q22 results came in below expectations, especially when compared with its stellar 4Q21 results. However, we do note that 1Q is usually the group’s seasonally weaker quarter (1Q21 core PATAMI only made up 10.1% of its FY21 earnings) as Media Prima’s earnings are usually backloaded to 4Q as it is a seasonally stronger quarter for advertising. Having said that, the group’s 1Q22 results were still weaker-than-expected mainly dragged by its home shopping segment due to a trend reversal as more consumers return to physical shopping following the easing of lockdown restrictions. Nonetheless, we are cognizant that the group is currently revamping its home segment to leverage on all of its media platforms to harness its data and generate renewed demand. We are also comforted by the fact that the group recorded continued growth in advertising and content sales. We believe that future earnings will be heavily contributed by both of these segments, supported by (i) increase in adex from e-commerce shops and platforms as well as the return of advertisers to traditional broadcasting platforms; and (ii) continued growth in demand for local content from new and existing OTT platforms, driving higher content sales.

Forecast. Given the results shortfall, we lower our FY22/FY23 core PATAMI by 25.0%/22.2% to RM50.7m/RM62.1m. We introduce FY24 forecasts.

Maintain BUY with a lower TP of RM0.67 from RM0.72 following the earnings cut but partially offset by rolling over of valuation year to FY23 from FY22 based on an unchanged 12x P/E multiple. 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 and the growth in content sales. Moreover, the group also has an attractive projected FY22 dividend yield of 6.5%.

Source: Hong Leong Investment Bank Research - 31 May 2022