Media Prima’s 1H22 core PATAMI of RM15.3m (1H21: RM19.9m) came in below our and consensus estimates at 30.2% and 24.3% respectively. The results shortfall was mainly due to the decline in the home shopping as well as the publishing segment. Given the results shortfall, we lower our FY22/23/24 forecasts by 23%/20.5%/21.7% respectively. Maintain BUY with a lower TP of RM0.54 based on 12x P/E of FY23 EPS. Despite the shortfall we believe that subsequent quarters’ earnings would be supported by the group’s integrated ad sales solution through Omnia as well as its growth in content sales. Moreover, the group also has a projected FY22 dividend yield of 4.1%.

Below expectations. Media Prima’s 2Q22 core PATAMI of RM10.8m (QoQ: +1.5x; YoY: -26%) brought 1H22’s sum to RM15.3m (-23.2% YoY). The results came below our/consensus expectations, accounting for 30.2%/24.3% of the full year forecasts. The results shortfall was mainly due to the decline in the home shopping as well as the publishing segment. 1H22 core PATAMI is computed after adjusting for (i) net impairment reversal (-RM6.3m); (ii) forex gain (-RM326k); (iii) inventories written back (-RM38k); (iv) gain on termination of leases (-RM3.2m); (v) legal claims charge (+RM3.3m); and (vi) loss on disposal of PPE (+RM13k).

Dividend. None (2Q21: none). 1H22: none (1H21: none).

QoQ. Revenue increased by 5.3% mainly contributed by higher advertising revenue (+12.4%) which more than offset the decline in the other segments. The increase in advertising revenue was due to the higher ad spend by advertisers for the Hari Raya festive season. Consequently, core PATAMI increased by +1.5x from a low base of RM4.4m in the preceding quarter.

YoY. Revenue decreased by -10.9% mainly due to the decline in the home shopping (-44.4%), newspaper sales (-30.5%), newspaper printing (-37.4%) and content sales (-13.2%) segments, while partially offset by the increase in advertising revenue (+3.9%). The decrease in home shopping was due to consumers returning to physical shopping as the country entered endemicity, while the decline in the publishing segment was due to a decline in newspaper circulation and lower news printing services sold to external customers. In line with this, core PATAMI declined by -26%.

YTD. Revenue decreased by -7.1% mainly due to the decline in the home shopping (-44.5%), newspaper sales (-28.1%) and newspaper printing (-34.3%) while partially offset by advertising (+8.6%) and content sales (+38.8%). In turn, core PATAMI declined by -23.1%.

Outlook. Despite Malaysia entering endemicity as well as the restart of economic activities and international travel as compared to last year, Media Prima’s 2Q22 results still came in below expectations. Nonetheless, we remain cautiously optimistic on the group’s 2H22 as there is a potential boost to adex from at least one adex friendly event – FIFA World Cup (21 Nov to 18 Dec). A dark horse event that could emerge to possibly boost adex further as well is the event of an early GE15. We also note that 4Q is the group’s seasonally stronger quarter as advertisers spend more freely for the holiday season. Besides this, we are also upbeat on the positive growth trend seen in its content sales as more OTT platforms and foreign broadcasters aim at obtaining more local content to penetrate the local market.

Forecast. Given the results shortfall, we lower our FY22/23/24 forecasts by 23%/20.5%/21.7% respectively.

Maintain BUY with a lower TP of RM0.54 based on 12x P/E of FY23 EPS. Despite home shopping and the publishing segments continued drag on the group’s performance we believe that Media Prima’s integrated ad sales solution through Omnia as well as its growth in content sales will sustain its earnings in the following quarters. Moreover, the group also has a projected FY22 dividend yield of 4.1%.

Source: Hong Leong Investment Bank Research - 25 Aug 2022