Media Prima’s 4QFY23 core PATAMI of RM10.9m (QoQ: +67.7%; YoY: -61.1%) brought 12MFY23’s sum to RM32.7m (YoY: -35.5%) which made up 57.7% and 54.5% of our and consensus 18MFY23 estimates. We consider the results to be below expectations as the Oct-Dec period is typically the group’s best performing quarter. Results shortfall was mainly due to lower than expected advertising revenue. In view of the results shortfall, we cut our FY23/24/25 forecasts by -23.3%/-14.4%/-14.8%, respectively. As subsequent quarters earnings are clouded by the uncertain economic environment, we downgrade to HOLD with a lower TP of RM0.42, pegged to a lower PE multiple of 11x based on FY24 EPS of 3.8 sen.

Below expectations. Media Prima’s 4QFY23 core PATAMI of RM10.9m (QoQ: +67.7%; YoY: -61.1%) brought 12MFY23’s sum to RM32.7m (YoY: -35.5%) which made up 57.7% and 54.5% of our and consensus 18MFY23 estimates. We consider the results to be below expectations as the Oct-Dec period is typically the group’s best performing quarter. Results shortfall was mainly due to lower than expected advertising revenue. 12MFY23 core PATAMI is computed after adjusting for (i) net impairment of financial instruments (RM9.1m); (ii) gain on disposal of PPE (RM17k); (iii) gain on termination of leases (RM3.2m); (iv) forex gain (RM1.1m); (v) legal claims (RM4.8m); and (vi) Covid-19 related rent concession (RM10.6m).

Dividend. None (4Q21: 1.5 sen). 12MFY23: none (FY21: 1.5 sen).

QoQ. Revenue increased by 6.5% mainly lifted by advertising (+15.8%). This coincides with the year-end holiday season as well as the FIFA World Cup. However, core PATAMI increased by a larger magnitude of +67.1% due to better operating leverage.

YoY. Revenue decreased by -20.0% mainly dragged by its main revenue contributors of advertising (-13.9%), content sales (-42.6%) and home shopping (-45.1%). Consequently, core PATAMI decreased by -61.3%.

YTD. Revenue decreased by -10.9% due to the home shopping (-45.9%), newspaper sales (-22.1%) and newspaper printing (-33.2%) segments while partially offset by advertising (+0.5%) and content sales (+24.6%). The slight improvement in overall advertising was due to an improvement in the group’s OOH segment as demand for OOH advertising increased following the increase in vehicle and foot traffic. With overall top-line fall, core PATAMI decreased by -35.5%.

Outlook. Media Prima’s 4Q disappointed despite it being a stronger season for the group’s earnings, especially considering that there was a major sporting event in the FIFA World Cup. Management has guided that the lower than expected contribution from advertising was due to advertisers being cautious amidst the political instability during the election period. Looking ahead, the group’s FY23 prospects remain clouded as advertisers continue to be hesitant in view of the uncertain economic environment. Besides normalisation effect from a high base of adex in CY22, advertisers could further cut back on promotional and marketing activities should inflation remain elevated for longer, crimping consumer’s disposable incomes. Moreover, the group’s home shopping segment continues to underperform as it faces competition from other e-commerce platforms as well as consumers returning to physical stores to shop.

Forecast. In view of the results shortfall, we cut our FY23/24/25 forecasts by -23.3%/ -14.4%/-14.8%, respectively.

Downgrade to HOLD (from Buy) with a lower TP of RM0.42 (from RM0.54) pegged to a lower PE multiple of 11x (from 12x) based on FY24 EPS of 3.8 sen (previously FY23 before the FYE change). We lower our PE multiple in view of the clouded earnings visibility ahead. Despite the disappointment, we believe that Media Prima’s subsequent quarters will continue to be supported by Omnia’s effective integrated ad sales solution as well as its vast library of local content.

Source: Hong Leong Investment Bank Research - 23 Feb 2023