Media Prima (MPR) recorded a core net loss of RM143.1m in 2017, falling below our and consensus expectations. The variance against our forecast was largely due to a steeper-than-expected decline in TV network and print media contribution. We have cut our 2018-19E core EPS by 24-28% given the weak 2017 results and also introduce our 2020E numbers. We are expecting adex to improve in 2018 on the back of major events such as general election and World Cup. Nevertheless, we are cautious on the stock given the given risk that adex and newspaper circulation may remain weak. We raise our TP to RM0.45, but we maintain our SELL call on MPR.

2017 Core Net Loss at RM143.1m

MPR’s 2017 revenue declined by 7.3% yoy to RM1.2bn, mainly attributable to lower advertising and newspaper sales as the shift to digital media significantly affected the group’s traditional media platforms. Revenue contribution was lower yoy from the print media (-22%), TV network (-14%) and radio (-3%) divisions, but offset by higher contribution from the outdoor media (6%), digital media (+71%) and home shopping (+111%) divisions. MPR registered a LBT of RM605.5m in 2017, much worse than 2016’s LBT of RM65.9m. After excluding one-off items, MPR still reported a core net loss of RM143.1m vs. core net profit of RM49.0m in 2016.

Slight Pick-up in TV Adex in 4Q17

Sequentially, MPR’s 4Q17 revenue increased by 6.1% qoq to RM306.2m after a rather weak 3Q17 of RM288.5m. The increase was driven by higher contribution from most segments, the largest being TV networks (25%) attributed to higher advertising spend by clients during year-end school break and festive season.

Increase TP to RM0.45 But Maintain SELL

We reduce our earnings forecasts for FY18-19 by 24-28% in light of the weak 2017 results. Moving into 2018, we expect some improvement in adex on the back of major events such the general election and the 2018 FIFA World Cup in Russia. We now apply a higher PE target of 17.7x (the latest 5-year average; from 12x previously) and raise the TP to RM0.45. We maintain SELL on MPR as we are cautious on the stock given the further earnings risk if adex and newspaper circulation remains weak.

Source: Affin Hwang Research - 23 Feb 2018