Media Prima’s (MPR) 9M17 revenue declined by 8.3% yoy, partly attributable to lower advertising revenue and newspaper sales. The traditional media platforms continued to see a weak adex environment. MPR reported a core net loss of RM77.5m vs. a core net profit of RM43.2m in 9M16. We maintain our SELL call on the stock with a lower TP of RM0.41.

Loss Before Tax of RM276.8m in 9M17

MPR’s 9M17 revenue declined by 8.3% yoy to RM889.5m, mainly attributable to lower advertising and newspaper sales as the shift to digital media significantly affected the group’s traditional media platforms. MPR has ventured into the digital and consumer-based business to complement the group’s traditional media segments, but these initiatives remain in a gestation period. Revenue contribution was lower yoy from the print media (-19.9%), TV network (-18.2%), content creation (-7.4%) and radio (-5.2%) divisions, but partially offset by higher contributions from the outdoor media (+4.7%), digital media (+364%) and home shopping (+148%) divisions. MPR recorded a loss before tax of RM276.8m in 9M17 (partly due to impairment of investment in an associate amounting to RM142.4m and early retirement scheme amounting to RM52.3m) vs. a loss before tax of RM61.1m in 9M16 (partly due to restructuring of NSTP’s printing manufacturing operations amounting to RM104.6m. Excluding one-off items, MPR still reported a core net loss of RM77.5m vs. core net profit of RM43.2m in 9M16. Our previous and consensus core net profit forecasts for 2017 are RM41.2m and RM13.9m respectively. The variance was mainly due to the lower-than-expected contribution from the print division.

Maintain SELL Rating With a Lower TP of RM0.41

We have cut our FY18-19E core EPS forecasts by 34-42%, while projecting a RM30.8m core net loss for FY17, to account for the weak 9M17 results. We are still cautious on Media Prima largely due to: 1) the unfavourable shift in broadcast adex towards the pay TV segment; 2) cautious ad spending given the uncertainties in the market; 3) rising competition from other broadcasters; 4) negative effects on adex due to the declining TV viewership; and 5) negative effects on hard copy circulation due to the continued shift in reader preferences to reading on mobile devices or over the Internet. Thus, we are keeping our SELL rating on MPR and have lowered our target price to RM0.41 (from RM0.62). This is based on an unchanged 12x (1SD below 5-year average mean) 2018E core EPS.

Source: Affin Hwang Research - 30 Nov 2017