Weakness in Media Prima’s (MPR) core divisions, namely TV and print, which we attribute to the continued weakness in adex as well as shifting preference towards the digital platform, leaves us cautious on MPR. New ventures as part of the Odyssey transformation programme are still at the early stages and have not provided enough impetus to offset the drag caused by MPR’s core divisions at this juncture. We reaffirm our SELL rating with a lower target price of RM0.25. Our new TP is based on 0.9x (2SD below 3-year average) 2019E NTA per share of RM0.28 after factoring in the weakness at both the print and TV segments.

Weakness in Core Businesses to Stay

MPR’s key divisions, TV and print (68% of revenue), continue to be a drag on the group’s overall performance. The rising momentum of online reading habits coupled with a lackluster adex outlook has contributed to the dismal bottom line for both segments. Among the traditional media platforms, the radio segment remains resilient and the out-of-home segment is another division that could provide a significant earnings boost to offset losses in the core divisions. Nevertheless, contributions from the latter two segments are insufficient to negate the slowdown in the TV and print segments.

New Businesses Also Cannot Compensate for Shortfall

Management remains hopeful that new revenue streams from the group’s digital and home-shopping business (collectively 15% of revenue) would provide the much-needed earnings boost moving forward. Losses are expected to narrow for the home-shopping business in 2018 and we forecast the division to break even in 2019. As for MPR’s digital segment, EBITDA margin remains healthy at 18% on the back of better digital adex.

Reaffirm SELL Rating With Lower TP of RM0.25

We have cut our 2019-20E core EPS forecasts by 27-88%, while projecting a RM17.2m core net loss for 2018E. We reaffirm our SELL rating on MPR, with a lower target price of RM0.25. We are changing our valuation method to P/NTA (net tangible assets) from PER previously in view of the lackluster performance as well as the expected losses in 2018E. Our new TP is based on 0.9x (2SD below 3-year average) 2019E NTA per share of RM0.28 after factoring in the weak print and TV segments.

Source: Affin Hwang Research - 4 May 2018